Wednesday, January 28, 2015

Nonprofit Gamers Issue Shell Notes

Bloomberg reported:

Leon Black’s Apollo Global Management LLC, Carlyle Group LP and a unit of Credit Suisse Group AG have all taken steps in the past two months to create CLOs now that they may be able to refinance after the rules take effect in December 2016 without having to comply with the new regulations, according to three people with knowledge of the matter. The firms are trying to avoid a requirement to hold a stake in the funds they manage.

Private equity firms have long been virtual nonprofits.  They package securitized debt mostly untaxed

Apollo raised a $786 million CLO on Jan. 23 that created two sets of bonds. The first set was sold to investors, while the second hasn’t yet been funded and would be used to refinance or reprice the deal in the future, said one of the people, who asked not to be identified because the information isn’t public. By assigning the shell notes an identification number and dating them now, the New York-based money manager is seeking the option to redo the deal without making it subject to the regulations. Morgan Stanley managed the offering. 
 Shell notes are the latest way the greed and leverage boys game the system.  It's a PEU world.