PE HUB Wire Highlights, 11.27.18

Denham, like many energy GPs, eyes liquidity process for older funds; Main Post Fund II raises $700 mln; In defense of private equity’s healthcare record

Morning, Hubsters.

We finally have some clarity on interest deductibility, with the release of 439 pages of regulations from the IRS, Bloomberg is reporting. The regulations provide guidance for a key provision of the 2017 tax overhaul that restricts deductions businesses can take from the interest they pay on loans, the story said.

Now, we’ve written on this before. But let’s go through it again. The 2017 tax bill caps interest deductibility at 30 percent of EBITDA until 2022. After that, the cap narrows to 30 percent of EBIT (earnings before interest and taxes), which is lower since it includes depreciation and amortization, Bloomberg said.

The tax change is causing PE firms to rethink how they finance deals. If earnings are low enough that the cap is triggered, funds may consider opting for equity instead of debt, which can dilute the value of the existing stake in the company, Bloomberg said. The deduction change is expected to raise about $253.4 billion in the next decade.

Hubsters, now that we’ve had some time to digest the tax provision, what do you think? Has anyone read the 439 pages from the IRS? What did you think? Email me your thoughts at lbeltran@buyoutsinsider.com

Bubble bursting: Oak Hill Advisors has amassed a $5 billion war chest that it will use to buy once the recession or downgrades hit, Bloomberg is reporting.BlackRock Inc, Blackstone’s credit arm GSO Capital Partners and Apollo Global Management, have all been shoring up their resources, the story said.

But that can’t be all. People have been talking about the next downturn since the 2009 recession. Who else is preparing? And what are you doing?

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