#debt

[retrogamingblog2]

[mostlysignssomeportents]

Red Lobster was killed by private equity, not Endless Shrimp

For the rest of May, my bestselling solarpunk utopian novel THE LOST CAUSE (2023) is available as a $2.99, DRM-free ebook!

A decade ago, a hedge fund had an improbable viral comedy hit: a 294-page slide deck explaining why Olive Garden was going out of business, blaming the failure on too many breadsticks and insufficiently salted pasta-water:

https://www.sec.gov/Archives/edgar/data/940944/000092189514002031/ex991dfan14a06297125_091114.pdf

Everyone loved this story. As David Dayen wrote for Salon, it let readers "mock that silly chain restaurant they remember from their childhoods in the suburbs" and laugh at "the silly hedge fund that took the time to write the world’s worst review":

https://www.salon.com/2014/09/17/the_real_olive_garden_scandal_why_greedy_hedge_funders_suddenly_care_so_much_about_breadsticks/

But – as Dayen wrote at the time, the hedge fund that produced that slide deck, Starboard Value, was not motivated by dissatisfaction with bread-sticks. They were "activist investors" (finspeak for "rapacious assholes") with a giant stake in Darden Restaurants, Olive Garden's parent company. They wanted Darden to liquidate all of Olive Garden's real-estate holdings and declare a one-off dividend that would net investors a billion dollars, while literally yanking the floor out from beneath Olive Garden, converting it from owner to tenant, subject to rent-shocks and other nasty surprises.

They wanted to asset-strip the company, in other words ("asset strip" is what they call it in hedge-fund land; the mafia calls it a "bust-out," famous to anyone who watched the twenty-third episode of The Sopranos):

https://en.wikipedia.org/wiki/Bust_Out

Starboard didn't have enough money to force the sale, but they had recently engineered the CEO's ouster. The giant slide-deck making fun of Olive Garden's food was just a PR campaign to help it sell the bust-out by creating a narrative that they were being activists* to save this badly managed disaster of a restaurant chain.

*assholes

Starboard was bent on eviscerating Darden like a couple of entrail-maddened dogs in an elk carcass:

https://web.archive.org/web/20051220005944/http://alumni.media.mit.edu/~solan/dogsinelk/

They had forced Darden to sell off another of its holdings, Red Lobster, to a hedge-fund called Golden Gate Capital. Golden Gate flogged all of Red Lobster's real estate holdings for $2.1 billion the same day, then pissed it all away on dividends to its shareholders, including Starboard. The new landlords, a Real Estate Investment Trust, proceeded to charge so much for rent on those buildings Red Lobster just flogged that the company's net earnings immediately dropped by half.

Dayen ends his piece with these prophetic words:

Olive Garden and Red Lobster may not be destinations for hipster Internet journalists, and they have seen revenue declines amid stagnant middle-class wages and increased competition. But they are still profitable businesses. Thousands of Americans work there. Why should they be bled dry by predatory investors in the name of “shareholder value”? What of the value of worker productivity instead of the financial engineers?

Flash forward a decade. Today, Dayen is editor-in-chief of The American Prospect, one of the best sources of news about private equity looting in the world. Writing for the Prospect, Luke Goldstein picks up Dayen's story, ten years on:

https://prospect.org/economy/2024-05-22-raiding-red-lobster/

It's not pretty. Ten years of being bled out on rents and flipped from one hedge fund to another has killed Red Lobster. It just shuttered 50 restaurants and declared Chapter 11 bankruptcy. Ten years hasn't changed much; the same kind of snark that was deployed at the news of Olive Garden's imminent demise is now being hurled at Red Lobster.

Instead of dunking on free bread-sticks, Red Lobster's grave-dancers are jeering at "Endless Shrimp," a promotional deal that works exactly how it sounds like it would work. Endless Shrimp cost the chain $11m.

Which raises a question: why did Red Lobster make this money-losing offer? Are they just good-hearted slobs? Can't they do math?

Or, you know, was it another hedge-fund, bust-out scam?

Here's a hint. The supplier who provided Red Lobster with all that shrimp is Thai Union. Thai Union also owns Red Lobster. They bought the chain from Golden Gate Capital, last seen in 2014, holding a flash-sale on all of Red Lobster's buildings, pocketing billions, and cutting Red Lobster's earnings in half.

Red Lobster rose to success – 700 restaurants nationwide at its peak – by combining no-frills dining with powerful buying power, which it used to force discounts from seafood suppliers. In response, the seafood industry consolidated through a wave of mergers, turning into a cozy cartel that could resist the buyer power of Red Lobster and other major customers.

This was facilitated by conservation efforts that limited the total volume of biomass that fishers were allowed to extract, and allocated quotas to existing companies and individual fishermen. The costs of complying with this "catch management" system were high, punishingly so for small independents, bearably so for large conglomerates.

Competition from overseas fisheries drove consolidation further, as countries in the global south were blocked from implementing their own conservation efforts. US fisheries merged further, seeking economies of scale that would let them compete, largely by shafting fishermen and other suppliers. Today's Alaskan crab fishery is dominated by a four-company cartel; in the Pacific Northwest, most fish goes through a single intermediary, Pacific Seafood.

These dominant actors entered into illegal collusive arrangements with one another to rig their markets and further immiserate their suppliers, who filed antitrust suits accusing the companies of operating a monopsony (a market with a powerful buyer, akin to a monopoly, which is a market with a powerful seller):

https://www.classaction.org/news/pacific-seafood-under-fire-for-allegedly-fixing-prices-paid-to-dungeness-crabbers-in-pacific-northwest

Golden Gate bought Red Lobster in the midst of these fish wars, promising to right its ship. As Goldstein points out, that's the same promise they made when they bought Payless shoes, just before they destroyed the company and flogged it off to Alden Capital, the hedge fund that bought and destroyed dozens of America's most beloved newspapers:

https://pluralistic.net/2021/10/16/sociopathic-monsters/#all-the-news-thats-fit-to-print

Under Golden Gate's management, Red Lobster saw its staffing levels slashed, so diners endured longer wait times to be seated and served. Then, in 2020, they sold the company to Thai Union, the company's largest supplier (a transaction Goldstein likens to a Walmart buyout of Procter and Gamble).

Thai Union continued to bleed Red Lobster, imposing more cuts and loading it up with more debts financed by yet another private equity giant, Fortress Investment Group. That brings us to today, with Thai Union having moved a gigantic amount of its own product through a failing, debt-loaded subsidiary, even as it lobbies for deregulation of American fisheries, which would let it and its lobbying partners drain American waters of the last of its depleted fish stocks.

Dayen's 2020 must-read book Monopolized describes the way that monopolies proliferate, using the US health care industry as a case-study:

https://pluralistic.net/2021/01/29/fractal-bullshit/#dayenu

After deregulation allowed the pharma sector to consolidate, it acquired pricing power of hospitals, who found themselves gouged to the edge of bankruptcy on drug prices. Hospitals then merged into regional monopolies, which allowed them to resist pharma pricing power – and gouge health insurance companies, who saw the price of routine care explode. So the insurance companies gobbled each other up, too, leaving most of us with two or fewer choices for health insurance – even as insurance prices skyrocketed, and our benefits shrank.

Today, Americans pay more for worse healthcare, which is delivered by health workers who get paid less and work under worse conditions. That's because, lacking a regulator to consolidate patients' interests, and strong unions to consolidate workers' interests, patients and workers are easy pickings for those consolidated links in the health supply-chain.

That's a pretty good model for understanding what's happened to Red Lobster: monopoly power and monopsony power begat more monopolies and monoposonies in the supply chain. Everything that hasn't consolidated is defenseless: diners, restaurant workers, fishermen, and the environment. We're all fucked.

Decent, no-frills family restaurant are good. Great, even. I'm not the world's greatest fan of chain restaurants, but I'm also comfortably middle-class and not struggling to afford to give my family a nice night out at a place with good food, friendly staff and reasonable prices. These places are easy pickings for looters because the people who patronize them have little power in our society – and because those of us with more power are easily tricked into sneering at these places' failures as a kind of comeuppance that's all that's due to tacky joints that serve the working class.

If you'd like an essay-formatted version of this post to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

https://pluralistic.net/2024/05/23/spineless/#invertebrates

[clonebrainrot]

I’m like 95% sure trump and Elon are crashing the economy on purpose. This is something Elon Musk explicitly said he would do

He warned about this before the election yet stupid fuckers voted for him anyway

[cazort]

Piece of financial advice, because I've seen too many people make this mistake: never pay off medical debt on a credit card unless you are 100% sure you will be able to pay the credit card balance off in full as soon as you get the first bill. Why? It is ALWAYS better to have medical debt than credit card debt. There is a long list of reasons why.

State and federal laws severely restrict medical debt in ways that credit card debt is not restricted.

Credit card debt can charge much higher interest rates, and in general it IS much higher in rate. Medical debt sometimes charges no interest, at least for a certain period of time. When it does charge interest, the rate is lower, and in some states it is capped as low as 5%, always at 20% or lower. Credit card interest rates are almost never below 15% and are sometimes MUCH higher than 20%.

Medical debt is less damaging to your credit history than credit card debt. And it is easier to eliminate in bankruptcy.

Medical debt also does not affect your spending limits on a credit card. If you use a credit card for monthly expenses, adding medical debt to it can bring you closer to your credit limit which might make you unable to use the card for expenses (even ones you could afford to pay off immediately.) This negatively affects your credit rating through increasing your credit utilization, it can reduce your potential to earn rewards, and it can reduce your spending power in an emergency.

Also, the penalties and fees for deliquency on medical debt are much milder and those for credit card debt are more severe. Again, laws are more restrictive on medical debt. You will have far fewer fees or penalties going delinquent on medical debt.

Also it is often easier to get medical debt forgiven or negotiated down, than credit card debt,

If you ever end up with medical debt, keep it as medical debt and keep paying it as medical debt. Go delinquent on your medical debt before switching it to a credit card. Once you put it on a credit card, you can't go back.

By keeping your medical debt as medical debt, you save money, protect your credit history, and increase your chances of having the debt forgiven, negotiated down, or eliminated through bankruptcy.

NEVER CONVERT MEDICAL DEBT TO CREDIT CARD DEBT.

[incognitopolls]

How much student loan debt do you have?

None; I didn't go to college/university

None; college/university was free or very, very low cost

None; I (or someone else) paid out of pocket, or it's fully paid off

Less than $5,000

$5,000–$9,999

$10,000–29,999

$30,000–$49,999

$50,000–$69,999

$70,000–$99,999

$100,000–$149,000

$150,000–$199,999

More than $200,000

Voting ended onSep 14, 2024

We ask your questions so you don’t have to! Submit your questions to have them posted anonymously as polls.

[ajdoesprompts]

Peter’s academic record was not exactly impressive.

Okay, it was a total shit show. He barely even shows up anymore, not seeing much point. Marwood high school didn’t exactly have a stellar reputation for producing high achieving students and Peter didn’t care about getting good grades anyway.

His plan was always to get a third shitty job as soon as possible so that he could pay off some of May’s medical debts.

He didn’t even really understand how the letter arrived in the first place, inviting him to an interview at Midtown School of Science and Technology. All he knew was that his engineering teacher gave him some test and he answered the questions. Mr Ackle said he answered some ‘impossible question’ from Tony Stark’s research into the arc reactor but Peter was sure he was lying until about a week ago.

The interview itself didn’t feel like it went particularly well. The only part that was good was the tests where he was surprised by how simple the content was. He must have done better than he thought though, because the acceptance letter came through a week later.

And sure, he could have said yes, but the school wanted a minimum of 95% attendance and Peter just couldn’t commit to that between his jobs and May needing him.

So he declined.

And maybe he wouldn’t have, if he’d have known. Maybe if someone had told him that Tony Stark would somehow hear about his test scores, he would’ve thought twice about making himself stand out.

Because sure, a genius in Midtown was something Tony Stark might be interested in.

But a genius who declined their full ride scholarship? A genius with shoddy attendance and an extensive behaviour record?

Peter really shouldn’t have been shocked when Stark showed up at his house.

[bitchesgetriches]

So I'm 25 and 7 years into a bachelor's degree and while I know i shouldn't feel bad that I'm going my own pace I just can't help but feel like I'm so behind and I'm scared for my future because I could've been a lot further in life now but I'm still here

NO. YOU STOP THAT RIGHT NOW. DON'T YOU DARE INSULT OUR BABY LIKE THAT.

You are a brilliant, beautiful, kind, and clever person and we believe in you something FIERCE. There is absolutely no reason to race through your education. You're going at the right pace for YOU and we want you to continue that pace. So what if other people are going faster? That's them. Their needs and abilities have nothing to do with you.

This is how you need to do it. So do it. Keep your head up and know that we are real goddamn proud of you. When you graduate, you're going to tell us so we can cry tears of pride and joy for our baby.

Now get out there and do the thing. We're all rooting for you.

Here's your homework:

Learning To Reverse the Golden Rule

Did we just help you out? Join our Patreon!