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Senate Bill Rattles Private-Equity Nerves
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Since the bill was announced Thursday, the authors "have not heard a single word of dissent," said a Republican aide on the Finance Committee who did not want to be identified because he was not authorized to speak to the press.
"I think the bill will move fast," the aide said. "We want to make sure to hear from folks, but we want to move expeditiously."
The bill's announcement has rankled the normally collegial ranks of the private-equity industry. Several firms, including the Carlyle Group of the District and Apollo Management, were considering IPOs. Now, their taxes could jump from 15 percent to 35 percent if they go public.
Yesterday, some private-equity officials pointed fingers at Blackstone and its chief executive, Stephen Schwarzman. They said that Schwarzman did not help the industry by structuring the IPO to enrich himself with a $7.5 billion stake and as much as $677 million in cash. His image, fostered by lavish birthday parties and flamboyant profiles in business publications, may have made him an easy target for politicians.
"I think there's wide perception that Mr. Schwarzman shot himself in the foot," said the private-equity industry operative who has been talking to many firms. Blackstone declined to comment.
The bill would directly affect Blackstone and Fortress Investment Group, a smaller firm that runs both hedge and private-equity funds. Since both firms have filed to go public, the bill would give them a five-year grace period at the lower tax rate. But analysts expect the value of their businesses would decline because their tax bills eventually would increase by hundreds of millions of dollars.
Stock in Fortress, which went public in February, fell 6.5 percent yesterday.
Analysts think the legislation is likely to be enacted and are adjusting the market values of Blackstone and Fortress .
"This bill is going to pass," said Scott Appleby, an analyst who follows Fortress for Deutsche Bank. "It's already got bipartisan sponsorship."
For its part, Blackstone executives were huddled in meetings yesterday to craft a strategy, said a source who has been in close contact with Blackstone but requested anonymity because he was not authorized to speak about the firm's internal discussions.
"They're trying to figure it out," he said.
