Week of May 6, 2019
Colin Dismuke / May 06, 2019
4 min read
A few things of note from around the Internet this week:
Imagine that there was a law that forced every employer to quote both the absolute salary (like \$120,000 in SF) and the after-tax PPP-adjusted salary (would transform to probably \$50,000 in SF). What would happen?
I’ve long thought that the ideal form of health and exercise monitoring would be a small sensor placed underneath the skin, however, a super-powered hearing aid might work just as well.
Sawalich is fond of saying that Starkey makes a product nobody wants. Almost two-thirds of the people in America who need hearing aids don’t have them, and those who do accept their fate wait an average of seven years from the first symptom before seeking help. “With these, hearing aids are going to evolve,” he says, “so that you don’t have to have hearing loss to want a hearing aid.”
How did this captain know — from 50 feet away — what the father couldn’t recognize from just 10? Drowning is not the violent, splashing call for help that most people expect. The captain was trained to recognize drowning by experts and years of experience. The father, on the other hand, learned what drowning looks like by watching television.
Who was living upstairs in the room with the bunk beds, surrounded by glow-in-the-dark solar-system decals? I couldn’t understand how this had happened. The situation was ludicrously overdetermined, as contrived as a bad movie. My husband and I poured everything we had into nurturing an empathetic, observant child. Until then, it had seemed to be working. Teachers and family friends had always commented on Sam’s kindness and especially his gentleness toward the “underdog.” Then an internet chorus of alt-right sirens sings their song of American History X to my kid and he turns into the evil twin of Alex P. Keaton: merciless, intolerant, unwilling to extend the benefit of the doubt to anyone.
The pendulum had swung. And now it was stuck.
In order to buy Remington, Cerberus, as most private-equity firms would, created a new entity, a holding company. Instead of Cerberus buying a gun company, Cerberus put money into the holding company, and the holding company bought Remington. The entities were related but — and this was crucial — each could borrow money independently. In 2010, Cerberus had the holding company borrow \$225 million from an undisclosed group of lenders, most likely hedge funds. Because this loan was risky — the lenders would be paid only if Remington made a lot of money or was sold — the holding company offered a generous interest rate of around 11 percent, much higher than a typical corporate loan. When the interest payments were due, the holding company paid them not in cash but with paid-in-kind notes, that is, with more debt. These are known as PIK notes.
The holding company now had \$225 million in borrowed cash. Cerberus, meanwhile, owned most of the shares of the holding company’s stock, basically slips of paper they acquired when they created the holding company. The handoff happened next: The holding company spent most of the \$225 million buying back its own stock, effectively transferring all the borrowed cash to Cerberus. Cerberus would keep that money no matter what.
The irony of the situation is not lost on me; not only that Zuckerberg’s and the twins’ roles as the rebels versus the evil Empire seem to have been reversed, but also that The Accidental Billionaires and the film that followed helped enshrine an image of the twins that is in desperate need of revision. It is now my opinion that Tyler and Cameron Winklevoss didn’t just happen to be standing in the exact right place at the exact right time—twice.
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