Private equity bubble hangover yields HR headache
By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Private equity’s bubble hangover has brought staffing headaches – and Terra Firma is suffering acutely. Guy Hands, the boss of the British buyout firm, is dipping into his own pocket to fund 20 million pounds of bonuses for employees over the next two years. The largesse is a necessary step to keep staff through an otherwise lean period. But Hands has made life particularly tricky for himself.
Dodger blue outshines gold after $2 bln deal
By Christopher Swann and Martin Hutchinson The authors are Reuters Breakingviews columnists. The opinions expressed are their own. The $2 billion deal for the Los Angeles Dodgers is a home run for sports owners everywhere. The near five-fold rise in the value of the West Coast baseball team since it last changed hands in 2004 underlines a surge in the value of top sports franchises. Only gold comes close to keeping pace as an investment. Rising television revenue is bringing in more cash. But it’s the swelling ranks of the ultra-rich in search of trophy investments that’s stoking prices.
These new owners usually stem from the ranks of high finance. Last year, Apollo co-founder Joshua Harris bought basketball’s 76ers in Philadelphia while Tom Gores and his buyout firm Platinum Equity snapped up the Detroit Pistons. And only last month, hedge fund manager Steven Cohen bought a 4 percent slug of the Mets.
But Frank McCourt has scored the best deal so far from selling to a consortium including Guggenheim Partners and basketball legend Earvin “Magic” Johnson. The Dodgers’ owner, who paid $430 million for the team eight years ago and managed to keep control despite its bankruptcy last year, is walking away with a far better return than he would have earned elsewhere. Putting his money in the S&P 500 Index would have won only a 42 percent return. Gold fared better, up about 300 percent.
Apax finds French twist on bankruptcy tourism
By Neil Unmack
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Restructuring specialists have a lot to thank the UK for. The country’s creditor-friendly legal framework has drawn companies from across Europe to restructure in London. European Union law states that companies should use the insolvency regime relevant to their centre of main interest, or “comi” for short. But the concept is elastic; a Greek mobile telecoms company, Wind Hellas, was able to restructure in London by relocating one of its companies from Luxembourg to the UK.
Top hedgies show Wall Street how it’s done
By Richard Beales
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
For bankers, the cash is greener on the other side of Wall Street. The top 40 hedge fund managers took home $13.2 billion between them for 2011, Forbes estimates. Yet even industry godfathers like Ray Dalio of Bridgewater Associates manage to attract far less opprobrium than bank bosses, whose paychecks are considerably smaller.
Browne’s North Sea idea is more than nostalgic
By Kevin Allison
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Buying into Fairfield Energy, the North Sea-focused UK oil producer, would be a fitting move for John Browne. In the 1980s, when some of Fairfield’s most attractive assets were first being developed, the ex-BP boss was managing the Forties oil field off the coast of Aberdeen. But Browne’s interest in Fairfield, reported by the Sunday Times on Feb. 26, is likely to be more than just nostalgic. Fairfield specialises in mature oil fields that no longer interest the big majors. With oil prices likely to remain high for some time, and opportunities to buy unwanted acreage increasing, the deal has sound commercial appeal.
Romney tax row may bite European private equity
By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Mitt Romney’s low-tax private equity payouts caused a storm stateside. European buyout bosses are unlikely to run for high office. But, like the former Bain Capital boss fighting to clinch the Republican presidential nomination, they also cash in on “carried interest” schemes which usually avoid income tax. The system is due a re-think on both sides of the Atlantic.
If you don’t have health insurance and get sick, the tax payers have to pay for it anyway- so go get health insurance please- search online “Penny Medical” and learn how you can get insurance at discount price.
April Fool’s comes early to comical M&A market
By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
It’s hard not to smirk at the latest transaction to shoot out of the M&A pipeline. America’s largest title insurer, the $4 billion Fidelity National Financial, is buying O’Charley’s, an owner of U.S. steak joints. Not only is it a deal ripe for bad jokes about a combination plate of mortgage deeds and French fries. It also defies all convention.
Gingrich makes Goldman 4-letter word – to no avail
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The Florida Republican primary’s big winner tonight may be Wall Street’s most infamous bank. Front-runners Newt Gingrich and Mitt Romney are trying to connect one another to the financial crisis. Gingrich paints his rival as an agent of the giant vampire squid, while Romney criticizes his opponent for being paid handsomely for advising Freddie Mac to inflate the housing bubble. But in a state still in pain from the bust, Romney’s line is winning.
Endemol tussle shows trials of evicting LBO owners
By Quentin Webb
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Contestants live under constant threat of eviction on “Big Brother”, Endemol’s flagship television show. Creditors have found turfing out the company’s owners much harder.
After years of wrangling, hedge funds which bought the TV producer’s loans on the cheap are set to take sizeable stakes through a debt restructuring. That makes Endemol a textbook example of what the distressed-debt specialists which are pouring capital and manpower into Europe call a “loan-to-own” deal. But it’s also a case study in how difficult these victories can be.
A speech on taxes that would help Romney’s run
By Daniel Indiviglio
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
The following is an imagined speech that Mitt Romney could deliver to handle attacks on his private equity background and low personal tax rate while simultaneously appealing to moderate U.S. voters to help his run for the White House.
Low taxes on capital gains do not encourage investments. Reagan proved that with the 1986 Act when it equalized the tax rates for capital gains and ordinary income. The real justification for taxing investment income at lower rates than other forms of income is that those earning it contribute generously to campaigns.
The most common form of capital gain for the bottom 99% is from selling their house. The first $500,000 of gain already is exempt from tax. Few of the bottom 99% earn capital gains, anyways. FactCheck.org noted that over 80% of capital gains inured to and were realized by those earning $200,000+. See http://www.factcheck.org/2008/04/impact- of-capital-gains-tax-on-the-middle-class /. Thus, saying you’ll eliminate capital gains taxes for the bottom 99% is a throwaway line.
And if this were done, it is inevitable that we would immediately see political pressure, backed by massive campaign contributions and “studies” from marketing shops masquerading as “think tanks”, to raise the threshold for taxing capital gains. And President Romney would support it.
Further, to the extent the Internal Revenue Code treatment of income creates incentives or disincentives, then taxing salaries and wages at higher rates than capital gains punishes working for a living. One need not ask whether that is sound policy.
BTW, Warren Buffet once proposed imposing a surcharge on short-term capital gains to discourage speculation. I suspect that short-term for Mr. Buffet is less than 10 years.
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