Sunday, April 5, 2009

Carlyle Group's Freescale Writedown Washes Through AIG's PEU

The Carlyle Group wrote down 85% of its holding in Freescale Semiconductor. AIG Private Equity Ltd. held a chunk of that. Heavy debt financed deals have covenants specifying debt to equity ratios. When equity is written down, new capital must be put up to keep the ratio intact.

How much will Uncle Sam give to the Carlyle Group through AIG? Taxpayers already gave tens of billions to big banks, paying full value for "obligations". Meanwhile, Carlyle buys back debt for 23 cents on the dollar.

Private equity underwriters (PEU's) win. Tim Geithner just promised to backstop them. The G20 didn't mention private equity in its new regulatory framework. And Uncle Sam works hard to funnel cash and business to PEU's and their thousands of affiliates.