Re: HOMESTEAD: Ray Carey's Democratic Capitalism & Kelso

[John Médaille <john@medaille.com>]

At 10:53 PM 7/27/2005 -0400, Norman G. Kurland wrote:
>Sorry, I goofed.  I sent an earlier unedited version of the footnote on 
>the company, which understated the performance of Mid-South Building 
>Supply.  Here's the corrected version, showing the correct date of the 
>sale, thus reflecting a 19-year, not a 20-year history as a 100% worker 
>owned company.  In the last 4 years, share values have increased annually 
>by 19.5%, 25%, 29%, and 32%.  Not too bad an example of Kelsonian pure 
>credit financing.

Well, surely not Kelsonian credit. Unless they've been getting zero 
interest loans from the Fed.

>5.  The closest pure credit Kelsonian model in the United States of which 
>we are aware is the December 31, 1985 leveraged buyout of 100% 
>worker-owned Mid-South Building Supply headquartered in Springfield, 
>Virginia from its original owner at an appraised fair market value, with 
>all buyout funds supplied by a single commercial bank.  No worker put up 
>any money, and the loan was paid off in full out of profits in 12 
>years.  The company has expanded to 8 branches with over 300 full-time 
>workers throughout the region. As of December 31, 2004 the appraised value 
>of the company s shares allocated among the workers has increased 493% 
>above the original buyout price. Since the buyout the company has 
>increased its workforce by 1000%.

Well now that is quite a change. Instead of 1975, it was at the end of 
1985. Instead of a 7 year payback, a 12 year (8.3%). Instead of a 300% over 
29 years, it was 500% over 19 years, of which 254% came in the last four 
years. Total employee equity went up 5 times, and total employees went up 
10 times. So there were 30 employees in the original buyout, now there are 
300. So the original equity has increased 5 times, but spread over 10 times 
as many employees. Certainly better results over the first footnote.

I can only work with the numbers you give me.


John C. Médaille

"A dead thing can go with the stream...
but only a living thing can go against it."
         -G. K. Chesterton
http://www.medaille.com/distributivism.htm
john@medaille.com

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