SEC Mum on Blackstone Delay

WASHINGTON (AP) – Federal securities regulators gave no indication by late Wednesday that they planned to delay Blackstone Group LP's planned IPO.

The head of the Securities and Exchange Commission said details of the firm's proposed offering were moving through the agency's normal review process. Unless the agency steps forward with concerns, the private-equity titan's public offering of stock will be allowed to proceed, as scheduled, on Friday.

Some key lawmakers have voiced concerns to the SEC in recent days over the $4.75 billion Blackstone IPO, saying its first-of-a-kind character could have far-reaching effects on the financial markets and that it raises significant tax questions. The agency, as the recipient of this tightly focused congressional attention, has remained mum on whether it was considering imposing a delay or other actions.

“I'm just comfortable that the (Blackstone) filing is proceeding” through an agency review, SEC Chairman Christopher Cox told reporters, noting that the firm's proposal has been under the “normal process” of review by staff of the SEC's corporation finance division.

The AFL-CIO has appealed to the SEC to delay the IPO and to regulate the newly public Blackstone as an investment company.

Legislation proposed last week by the leaders of the tax-writing Senate Finance Committee would greatly increase the tax burden of private-equity firms like Blackstone and hedge funds that go public — closing a perceived loophole that gives asset-managing partnerships that tap the public markets a big tax advantage over corporations.

The bill's authors, finance panel chairman Sen. Max Baucus, D-Mont., and its senior Republican, Sen. Charles Grassley of Iowa, have written to Cox and Treasury Secretary Henry Paulson saying that the Blackstone IPO raises serious tax questions that must be resolved quickly.

Asked about that and their legislative proposal, Cox said Wednesday, “One has to imagine the normal timetable. … We'll follow our normal process and Congress will follow its normal process.”

He said the SEC would respond to their query “as soon as we can.”

In the House, the Democratic chairman of the Ways and Means Committee, Rep. Charles Rangel of New York, appears likely to consider drafting similar legislation and has indicated he may make an exception in this case to his long-standing opposition to taxes that apply retroactively.

By proposing legislation, Congress is putting private-equity firms that are contemplating going public on notice that they may be liable for increased taxes in the future, a House aide said Wednesday. Given that threat, he suggested it may be more efficient for those firms to structure themselves as corporations rather than partnerships — more complex structures that offer few advantages other than the current tax benefit.

At least for now, lawmakers are maintaining a laser focus on partnerships that manage other people's assets and are not advocating tax changes for other forms of publicly traded partnerships, which are common in the energy and real estate industries.
AP Business Writer Alan Zibel in Washington contributed to this report.