Thursday, February 18, 2016

Getty Images Gets Infusion of Cash from China

Getty images is getting "up to $100 million" according to Reuters (here) from Visual China Group, which might seem like a lot, but, in review, is really not. In 2015, Bloomberg Business reported on Getty's cash situation, in "Getty Images is Running Tight on Cash" (2/25/15).

What was reported was that, in the last quarter of 2014, Getty "depleted a third of its cash during the last three months of 2014, leaving it with $27 million...". That meant that Getty had $41M, or is burning through about $4.5Million a month. This may well not include payment in a $2.6 billion debt service. However, a $100 million investment amounts to just 3.8% of the $2.6 billion that Getty is in debt, and there is no sign that the blood-letting is coagulating. Getty already received $100 million in November 2015 ("Distressed-Debt Lenders Aid Getty Images in Battle Against Shutterstock", 11/5/15) from distressed debt lenders known to prey on troubled companies. 

Carlyle Group LP (NASDAQ: CG) previously used a leveraged buyout scheme to acquire Getty, so when Carlyle bought Getty for $3.3 billion in October of 2012, they saddled Getty Images with $2.8 billion of that debt, making Carlyle's actual disbursement at most just $500 million. Even so, With Visual China making this investment, it seems it is doing so to further their past investments in Getty after their Corbis acquisition. Carlyle is down in early trading 1.44%, with a loss of 42.41% on a single-year return and an 8.26% YTD return. Surely, Carlyle would like nothing more than to cut their underperforming assets, but with an albatross like Getty Images on it's books, it's no wonder The Street is reporting (here):
"TheStreet Ratings rates Carlyle Group L P as a sell. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share."
For those in the financial services sector, it's just one more business to watch the numbers on. For those in the trenches of the industry Getty serves, Getty Images is dying a slow and agonizingly painful self-inflicted death. It's like the shrewd investor analyst who actually goes to the farms in Kansas and sees first-hand the crops with lower yields, and gets out while they still can. Getty Images is near that point where the ships' hull is about to break apart, just like the Titanic. Many with knowledge of this industry know just how low the metaphorical visual "crop yields" are, and just how underperforming Getty Images is to the Carlyle portfolio.

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