Sunday, January 11, 2009

Pirate equity wants more swag

(Yet another effort to try to redistribute your hard earned tax dollars to bailout bad speculative bets made by rich folks. What's next? - sloganeering that what is good for Blackstone is good for America? Cognitive helplessness leads to learned dissidence... where is the outrage? - AM)

Wall Street Journal
January 10, 2009

An industry coalition is lobbying for a tax break that would allow companies to renegotiate troubled debt without incurring corporate income taxes, a potential windfall for many companies, including private-equity firms.

Under current law, any debt forgiven becomes taxable income. For example, if a company issues $1 billion in debt, but later runs into trouble and exchanges it for new debt worth $600 million, the remaining $400 million counts as taxable income.

Under Sen. Ensign's proposal, a company that buys back publicly traded debt at that discount would keep the remaining $400 million but owe no tax.

Private-equity firms have a particular interest in carving out this exception, because of the enormous debt accumulated in the just-ended leveraged-buyout wave. Many of the companies the buyout firms control are running into trouble, and some have been renegotiating their debt.

The bill includes a provision that extends the tax break to parties related to the original issuer of the debt. That is important to buyout firms, which could get a tax break by buying deeply discounted debt issued by troubled companies they control.

No comments: