Thames Water will sell to KKR, a private equity underwriter (PEU) according to the BBC. The debt bloated utility will stiff some creditors as part of the deal.
KKR will become the second financial barbarian to own Thames Water. Macquarie Asset Management held the British water utility from 2006-2017. Macquarie knows how much it siphoned from Thames Water through deal fees, annual management fees, dividends/special distributions and liquidity recapitalizations (debt for dividend).
Montanans can advise Londoners of the perils of PEU water utility ownership. The Carlyle Group purchased Mountain Water which supplied water for the City of Missoula. That sage resulted in surprise sales and loads of litigation. (PEU Report did many posts on Carlyle's treatment of Mountain Water.)
Macquarie Asset Management settled with the SEC on another matter in September 2024. Their statement reads:
This legacy matter is not consistent with how we do business. We have already undertaken and are focused on completing additional remedial steps to address the issues identified in the investigation, with clients the priority.So Thames Water's prior owner has had shady episodes. They are in the rear view mirror. What's ahead with KKR?
KKR Private Equity Conglomerate LLC is set up to invest in companies outside the U.S. Investors have pumped in nearly $10 billion to date (SEC filing). The most recent K-PEC annual report stated:
The Company operates so that it will qualify to be treated as a partnership for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended, and not as a publicly traded partnership taxable as a corporation. As such, it will not be subject to any U.S. federal and state income taxes. In any year, it is possible that the Company will be considered a publicly traded partnership and will not meet the qualifying income exception, which would result in the Company being treated as a publicly traded partnership and taxed as a corporation, rather than as a partnership. In such case, the members would then be treated as shareholders in a corporation, and the Company would become taxable as a corporation for U.S. federal, state and/or local income tax purposes. The Company would be required to pay income tax at corporate rates on its net taxable income.K-PEC has two KKR PEUs as co-chairman, Peter Stavros and Nathanial Taylor. In another small world revelation the 10-k stated:
Stavros was with GTCR Golder Rauner from 2002 to 2005, where he was involved in the execution of numerous investments in the health care sector.GTCR sold LifeCare Hospitals to The Carlyle Group just weeks before Hurricane Katrina struck New Orleans turning lifesaving facilities into death traps. Twenty four patients died in the LifeCare unit within Memorial Hospital (owned by Tenet Healthcare). That got no mention in President George W. Bush's Lessons Learned report and brother Jeb landed a spot on the Tenet Healthcare Board of Directors.
Having survived a river-flooded 725 bed hospital in Virginia and worked hard to evacuate a Texas Gulf Coast hospital before then record Hurricane Gilbert, I was particularly sensitive to the plight of those flood victims. Seeing politically connected PEUs get no mention provided the impetus for my blogging and PEU Report.
Politicians Red and Blue love PEU and increasingly, more are one. Elected officials had decades to eliminate PEU preferred "carried interest" taxation and did not, despite the public's loathing of this unfair tax break that helped grow millionaires into billionaires.
Water is life, too much is death and just as the fish has no concept of water, most of us do not know we live in a PEU milieu.
