Private equity giant Blackstone Group is unveiling a $40 billion infrastructure fund with the gulf nation, which will primarily invest in the United States. Saudi Arabia will commit $20 billion to the Blackstone infrastructure fund and another $20 billion will be raised from other limited partners, readying cash that could lead to $100 billion in total infrastructure investments on a leveraged basis.I'm sure the American public is comforted by the fact that our future tolls, air travel fees, water bills and other public services will help billionaires and the Saudis profit further.
Saudi Arabia's Public Investment Fund has agreed to commit $20 billion to the Blackstone infrastructure fund, which will be set up a permanent capital vehicle.Recall Saudi citizens flew home when everyone else in America couldn't take a plane after 9-11. Those Saudi citizens were in Washington, D.C. for the annual Carlyle Group investors meeting.
The Carlyle Group is also interested in infrastructure. COO Glenn Youngkin told CNBC:
“Airports, right out of the box, is the No. 1 target area right now. They are an understood commercial entity, and there are airports starting to move this way” already.Puerto Rico has the only commercial services airport operated under private management according to a Feb. 2016 Congressional report.
Chicago Mayor Rahm Emmanuel cancelled Midway Airport's planned privatization in 2013. Emmanuel made his post Clinton White House fortune as an investment banker for Wasserstein, Perrella and Company. Rahm made $18 million in two and a half years. Emmanuel served Bruce Rauner of GTCR Golder Rauner, a Chicago based private equity underwriter (PEU), according to Dealbook:
Instead of private equity, Mr. Rauner advised Mr. Emanuel to pursue investment banking, where his political experience might be more valuable in landing deals in regulated industries.
Mr. Emanuel called him back after starting at Wasserstein and asked if he could take over coverage of GTCR for his new employer.Rauner is currently the Governor of Illinois. Both Emmanuel and Rauner are in position to privatize public assets to their PEU peers.
President Trump not only appointed billionaire PEUs to key government posts, he is touring the world intent on giving them the opportunity to get richer.
The partnership comes as top executives, including Blackstone Chief Executive Officer Steve Schwarzman and KKR & Co. co-CEO Henry Kravis, descend on Riyadh for the inaugural Saudi-U.S. CEO Forum, a weekend of deal-making. The meetings, which have already yielded billions of dollars in deals between companies including oil giant Saudi Aramco and General Electric Co., are taking place as U.S. President Donald Trump visits the kingdom.Trump's infrastructure plan involves more leverage than Blackstone's:
Infrastructure investing has gained renewed attention as Trump’s administration vows to direct more private money toward improving roads, bridges and airports.
The president's budget proposal, expected to be unveiled next week, will include a call for $200 billion in federal funds over 10 years for infrastructure projects, according to Bloomberg, citing a senior Office of Management and Budget official.Private equity hates paying taxes. We'll see how much Blackstone's $100 billion permanent capital vehicle pays, if anything in taxes. We might have the Trump PEU infrastructure tax rebate. If so, the little people will pay and some of that will go to a Saudi investment fund. It's a flash back to 2007, only that deal was with a United Arab Emirates sovereign wealth fund.
The White House budget blueprint would also provide incentives for at least $800 billion of infrastructure investment by the private sector and state and local governments, the official said.