PEU's Meet Behind Closed Doors with Key Legislators

AltAssets reported on the move to tax carried interest as income:

A US bill being drawn up at Capitol Hill to tax private equity underwriters' carried interest as income could decimate investment in the country, according to an industry association.

Representatives from five of the 12 PEC member firms reportedly met behind closed doors with key legislators this week in a bid to overturn the proposed measures. Apollo Management’s Leon Black, Steve Schwarzman of Blackstone, TPG’s David Bonderman, Carlyle’s David Rubenstein, Glenn Hutchins of Silver Lake Partners, along with Wes Edens of non-member Fortress Investments, all met with Capitol Hill officials.

The PEU lobby predicts "the tax hike could reduce US private equity investment by $7bn a year." Heavy hitters tried to mobilize enough Red and Blue Congressional Corporacrats to stave off "carried interest" taxation for the fourth time. The Senate is the battleground, where literally every vote counts.

The White House also caters to PEU's. Consider in person visits made by the aforementioned:

David Rubenstein - 9
Steve Schwarzman - 6
Glenn Hutchins - 2
Wes Edens - 1

That's not counting conference calls. Elected leaders seek PEU counsel.

Update: BusinessWeek reported Rubenstein has Senator Evan Bayh on his side. That's not a surprise, given Carlyle's position as Bayh's #8 lifetime donor.

White House Toasts PEU Pass with Carlyle Group's Rubenstein?

Politico reported:

Last month, Elizabeth Vale, a White House liaison to the business community, e-mailed dozens of business leaders, inviting them to join senior White House economic officials Diana Farrell and Austan Goolsbee to discuss the Wall Street reform bill passed by the Senate the day before.
“We are pleased to invite you today to join senior White House officials for a conference call to discuss the historic financial Wall Street reform legislation passed in the Senate yesterday,” the invitation read, adding that the call was off-limits to the media.
The invitation was sent to some of the top financial services and business lobbyists in Washington, including Michael Paese of Goldman Sachs, Scott Talbott of the Financial Services Roundtable and Bruce Josten of the U.S. Chamber of Commerce.
Also on the e-mail list were Business Roundtable President John Castellani, Chamber President Tom Donohue and billionaire David Rubenstein, co-founder of the private equity firm The Carlyle Group.

Did Elizabeth Vale or Austan Goolsbee toast the virtual free pass given to private equity underwriters (PEU's) and sovereign wealth funds? The media wouldn't know. The open and transparent Obama administration shut out the Fourth Estate.

But don't worry, "an industry source familiar with the call said it was a fairly standard legislative update/pep rally." If so, who groped who? Did anybody rifle through taxpayer's drawers?

Update 7-27-14:  NYT noticed private equity's free pass

Morgan Stanley on Entitlements

ZeroHedge reported Morgan Stanley researchers are deeply concerned about America's entitlement spending. They included an appendix on the issue in a report on internet trends.

Morgan has someone in position to do something about the problem. Board member Erskine Bowles co-chairs Obama's Deficit Commission.



Given JP Morgan's ties to many commission members, I wonder what their researchers think?

Triumph Prices Senior Notes for Vought Acquisition

Zach's reported:

Triumph Group Inc. priced its senior notes recently. These notes priced equivalent to 99.270% of the face value and due 2018 aggregate $350 million and carry a coupon of 8.625% per annum.

The proceeds of the offer will be used to fund the acquisition of Vought Aircraft Industries Inc. Although, the Senior Notes will increase the net debt of Triumph, the acquisition will be accretive to earnings by 1 cent in the fiscal year 2010.

On March 23, Triumph decided to acquire Vought Aircraft Industries Inc. from a private equity firm, The Carlyle Group for $1.44 billion including the retirement of Vought debt.

Triumph will pay $525 million in cash and offer 7.5 million shares to Carlyle, which is expected to have a 31% stake in Triumph. The deal is expected to close by July 2010.

Vought owes the State of Texas $34.1 million plus interest for reneging on its promise of 3,000 new jobs. The Carlyle affiliate cut 35 positions from 2004-2009. Roughly 14% of Triumph's new notes would address the $48.3 million (principal + accumulated interest at 5% per year).

Unless The Carlyle Group makes Texas whole. That's not likely.

William Reilly's Temporary Leave of Absence Means More Work for Others

ConocoPhillips 8-K states:

On May 22, 2010, William K. Reilly was appointed by executive order to serve as co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. Mr. Reilly has informed the Company of his intention to take a leave of absence from his position as a Director of ConocoPhillips when the Commission begins its deliberations.

It was filed May 27, 2010, five days after my post on PEU Report. Mr. Reilly had this in his pocket when challenged by Rachel Maddow on June 4.

The leave may or may not impact Reilly's board pay. It won't remove his control of over $2 million in ConocoPhillips stock or their promising Gulf of Mexico deepwater oil plays.

Reilly said President Obama knew of his conflict, yet continued with the appointment. Was it a move to let oil insiders know "reasonable adults" were in charge? President Obama and his staff aren't saying.

With Reilly on leave, other ConocoPhillips board members will need to step up. How might Richard Armitage or Ken Duberstein contribute their talents? Both have consulting firms, force multiplier Armitage International LLC and The Duberstein Group.

Armitage threatened to bomb Pakistan back to the Stone Age, while Duberstein earned over $1.8 million consulting for Fannie Mae on regulatory issues. That's in addition to Duberstein's Fannie Mae board pay. Currently, the Duberstein Group lobbies for BP, receiving $500,000 from 2009 through Q1 2010.

Duberstein and Armitage work with the American Security Project's "A New American Arsenal," which focuses in part on energy security. With backup like that, Mr. Reilly can focus on the task at hand. Rest assured.

Carlyle Co-founder Distributionstein

Carlyle Group co-founder David Rubenstein noted the return of good times for private equity underwriters (PEU's). He told WaPo:

“We are now seeing a pickup. Valuations in our portfolio companies for the last three quarters have gone up. There has been a pickup in deal value and a pickup in distributions,” back to the people and firms that give private-equity companies money to invest.

The Carlyle Group monetized many affiliates in 2010. This provides checks for Carlyle investors, who like to touch their money once in a while. If salesman Rubenstein is successful, that's a brief touch. Reinvestment is a PEU's lifeblood.

Also, private equity managers might want to lock up "carried interest" profits, hoping to avoid tax increases.

William Reilly Takes Temporary Leave from ConocoPhillips Board

William Reilly said he disclosed his conflict of interest to President Obama, when the President asked him to co-chair the BP Oil Catastrophe Commission.

Reilly sits on the ConocoPhillips Board. He was paid roughly $250,000 in compensation in 2009 and controls over $2 million in ConocoPhillips stock. ConocoPhillips is a joint venture partner with BP in the massive Tiber field in the Gulf of Mexico.

Rachel Maddow's blog picked up PEU Report's research June 1. She pressed the issue directly with William Reilly on June 4. He stated:

"The president considered it an advantage that I do know the industry and have experience with it."

Odd, President Obama never cited Mr. Reilly's insider industry experience or connections, focusing solely on his EPA and World Wildlife Fund credentials.

As a result of Rachel Maddow's pressing, Mr. Reilly will take a temporary leave from ConocoPhillips board. That might mean less 2010 compensation from ConocoPhillips, however the board could choose to pay Reilly what he would've earned had he not been on Obama's Commission. The Commission report is due by the end of the year.

Consider what Board member Reilly heard at ConocoPhillips annual shareholders' meeting on May 12:

For our company, ConocoPhillips, we don't have a real large presence in the offshore Gulf of Mexico. We get about 1% of our production from offshore in the Gulf of Mexico and most of our emphasis is shown in this dotted oval area and that's where we either have some production or we have exploration effort. Now we've made some good exploration successes here in the past year and we'd like to do appraisal drilling, but we recognize that given the situation and the significance of this incident it is more than likely going to lead to more regulations, rules and deferrals or delays with respect to our effort on exploration and appraising these exploration successes.

ConocoPhillips added to their Gulf of Mexico portfolio in January 2010. Their press release states:

ConocoPhillips will acquire 50 percent working interest in 16 Statoil-operated Gulf of Mexico (GOM) leases and acquire all of Statoil’s 25 percent working interest in five additional GOM leases operated by ConocoPhillips. All of the involved GOM blocks are in the emerging Lower Tertiary play where ConocoPhillips has participated in the 2009-announced discoveries Tiber and Shenandoah.

Reilly will still control millions in ConocoPhillips stock. His Commission decisions will impact the future value of those holdings.

Rachel challenged appropriately, however the system hates publicizing insider connections, political and financial. Mr. Reilly looked distinctly more comfortable in his CBS News interview.

Update: Ken Salazar's abject failure "to thoroughly review" the Deepwater Horizon blowout makes Reilly's commission more important.