leveredequity

This is so disingenuous I don’t even know where to start.

How does income tax disincentivize work? You still generate positive income with a tax.

I don't believe the 1.3% is correct, as I think it's closer to 20-25%. Data I have seen supports that they put up $1.3bn of equity in the acquisition, in addition to ~$5Bn of debt (at ~7x leverage I think? -- that's more of the sticker shock). In today's market at least, you need to put up at least around ~30% of the purchase price as equity from the private equity firm.

The Toys R Us deal had a whole bunch of issues, and the business may very well have been over-levered. I do think we should bring back stricter leveraged lending guidelines, in some form.

Those fees, however, don't cover the losses the way that you think (sometimes they cover the amount contributed from the fund itself, not from its investors). I think there were only received $180M in management fees over the nearly 10 year hold paid to the 3 firms involved.

Totally agree, I thought we were arguing to bail out employees here. That's what I'm aware of based on what I've seen going on in the industry

That is simply not true. Management fees are such a small percentage of contributed capital. And, typically doesn't count towards your returns calculation.

I work at a PE firm. There are multiple strategies employed, but the name of the game is not to lose money. Disagree with the term "value creation" - fine - but my point is there is zero incentive to lose money. Otherwise, they would be out of business in the long term.

I am arguing for worker protection. Not protection of equity value. You inherently take on risk by deploying it, and should accept the realities of that risk.

It's disingenuous to say PE doesn't care. They have every incentive to preserve and generate equity value. That is literally their business.

However, the issue is employees are also hurt, not just equity and debt holders.

Edit: I don't see how you can disagree with this statement. Literally the only job of a PE firm is retain and create value for investors. They would be out of business if they did not do that. Hence, they care about preserving capital. With the caveat that this is in aggregate across the portfolio.

I don't disagree, however, that there needs to be significant regulation and social safety support for workers. I believe there needs to be significant changes to ensure we protect worker rights.

My point is no need to target preservation of equity value but instead ensure those facing job loss are supported. However, the current legislation doesn't allow portfolio companies to take bailout capital as a result of restrictions based on portfolio companies being "affiliates" of one another. Similar issues are faced by VC portfolio companies.

It's not about bailing out the investments, but about preserving jobs. Fine, attach restrictions for taking bailout capital, but that should be the purpose.