GOP/TAXES/TRUMP AS PRESIDENT: “House Republicans’ tax proposal faces stiff opposition from private-equity firms that say it threatens to disrupt their business model, which often relies on ladling debt onto acquisition targets.
Still, this version of the bill is more positive for the industry than a previous plan that may have had more dire consequences for firms’ returns. And they are holding out hope that more concessions are yet to come, as the bill has a long way to go before becoming law.
The version of the bill released Thursday [11-2-17], titled the Tax Cuts and Jobs Act, would limit businesses’ ability to deduct interest from their taxes with a cap of 30% of earnings before interest, taxes, depreciation and amortization. The prior version would have done away with interest deductibility entirely.
Private-equity firms say a cap would limit the amount of debt they could pin to companies, curbing potential returns. Private-equity firms typically purchase companies using a relatively small amount of equity and cover the remainder by heaping additional debt onto their targets.
The number of big leveraged buyouts has fallen dramatically since the financial crisis, though leverage on private-equity deals has been creeping higher in recent months.”
-Miriam Gottfried, “Private-Equity Firms Have a Beef with Tax Bill—but Things Could Be Worse,” The Wall Street Journal online, Nov. 3, 2017 05:30am