Distribution recapitalization
Carried interest
Terms that are at the heart of how the richest-paid executives in America earn their income. And, how hundreds of thousands of public sector employees through their pension funds assets investment with private equity firms.
http://www.nytimes.com/2016/12/10/b...kie-made-the-super-rich-even-richer.html?_r=0
Do you have a taste for Twinkies? You probably recall Hostess Brands was put out of business, through bankruptcy, but then made a comeback when its assets were bought, and the production of junk food once-again began appearing on store shelves. This was accomplished by an investment in the hundreds of millions of dollars by a private equity firm.
What isn't as-well known is that the highly-unionized workers of Hostess Brands who lost their jobs when Hostess went into bankruptcy and then were offered a chance to be re-employed, found that according to the bankruptcy laws, their existing union contracts were cancelled. They were free to apply to go to work again, but now it would be non-unionized, and the workforce would be one-sixth the size it was, benefits would be curtailed, and no more pensions for most workers. Of course, wages would be much-less than before the bankruptcy.
In the course of re-opening the Hostess bakeries, the private equity firm that bought the rights in bankruptcy, for $186 million in cash, and additional borrowed money, and which re-opened the business, soon borrowed more money from Credit Suisse, and then paid their investors and themselves nearly five times what they spent out-of-pocket through "distribution recapitalization." Money borrowed saw a percentage soon go to pay dividends to the private equity fund shareholders and its high-level executives. They then sold the business to another private equity firm, and kept benefits for themselves by retaining a percentage of the stock, and locking-in "carried interest." The latter allows a company to benefit from future earnings due to taxes paid via a lower by one-half capital gains tax rate compared to the average workers' 40% tax rate. “Tax-receivable” benefits can reward companies many years down the road once they are put in-place, though the private equity firm may have sold-off their holdings. All perfectly legal. And, huge pension systems of public sector employees who invest their billions of dollars with the private equity funds also benefit.
The Hostess Brands deal was determined to be the third-most lucrative such deal of 2015, by the world's largest business information and accounting firm, Thomson Reuters. http://www.reuters.com/article/idUSFWN19R0JB
I'm glad I took a public sector job which pays me a pension. Now I can afford plenty of Twinkies, and benefit myself financially. Maybe Twinkies aren't so-bad for you after all.
Carried interest
Terms that are at the heart of how the richest-paid executives in America earn their income. And, how hundreds of thousands of public sector employees through their pension funds assets investment with private equity firms.
http://www.nytimes.com/2016/12/10/b...kie-made-the-super-rich-even-richer.html?_r=0
Do you have a taste for Twinkies? You probably recall Hostess Brands was put out of business, through bankruptcy, but then made a comeback when its assets were bought, and the production of junk food once-again began appearing on store shelves. This was accomplished by an investment in the hundreds of millions of dollars by a private equity firm.
What isn't as-well known is that the highly-unionized workers of Hostess Brands who lost their jobs when Hostess went into bankruptcy and then were offered a chance to be re-employed, found that according to the bankruptcy laws, their existing union contracts were cancelled. They were free to apply to go to work again, but now it would be non-unionized, and the workforce would be one-sixth the size it was, benefits would be curtailed, and no more pensions for most workers. Of course, wages would be much-less than before the bankruptcy.
In the course of re-opening the Hostess bakeries, the private equity firm that bought the rights in bankruptcy, for $186 million in cash, and additional borrowed money, and which re-opened the business, soon borrowed more money from Credit Suisse, and then paid their investors and themselves nearly five times what they spent out-of-pocket through "distribution recapitalization." Money borrowed saw a percentage soon go to pay dividends to the private equity fund shareholders and its high-level executives. They then sold the business to another private equity firm, and kept benefits for themselves by retaining a percentage of the stock, and locking-in "carried interest." The latter allows a company to benefit from future earnings due to taxes paid via a lower by one-half capital gains tax rate compared to the average workers' 40% tax rate. “Tax-receivable” benefits can reward companies many years down the road once they are put in-place, though the private equity firm may have sold-off their holdings. All perfectly legal. And, huge pension systems of public sector employees who invest their billions of dollars with the private equity funds also benefit.
The Hostess Brands deal was determined to be the third-most lucrative such deal of 2015, by the world's largest business information and accounting firm, Thomson Reuters. http://www.reuters.com/article/idUSFWN19R0JB
I'm glad I took a public sector job which pays me a pension. Now I can afford plenty of Twinkies, and benefit myself financially. Maybe Twinkies aren't so-bad for you after all.
