The White House also proposed, as it has in the past, ending the preferential treatment of private equity and hedge fund profits, known as carried interest.
The private equity firm owns preferential shares in Kent that convert to common equity in the event of a flotation.
Senator Carl Levin, Democrat of Michigan and chairman of the Armed Services Committee, has drafted more ambitious legislation to raise nearly $200 billion for sequester replacement by closing off a variety of offshore tax shelters, ending preferential tax treatment for many private equity and hedge fund managers, and taxing the exercise of stock options more heavily.
Hedge funds and other investors also generate capital gains but usually don't hold on to assets long enough to qualify for preferential tax treatment.Critics counter that private-equity executives are more like investment bankers.
And should the company go under, you'll still recoup more of your assets than equity investors because bondholders enjoy preferential status under bankruptcy laws.
Instead, governments have often sought to use capital injections using preferential shares, which still leaves private shareholder equity and operational control with a board.
Removing the preferential tax treatment of debt relative to equity, and even giving incentive for better capitalization would make for a healthier system.
As part of the deal, these firms are given preferential treatment by the banks, including debt-for-equity swaps, lower interest rates, and access to a pool of some 2 trillion won in new loans and trade financing.Yet two-thirds of these firms are still likely to fail, according to the Financial Supervisory Commission, South Korea's financial regulator.
DealBook » K.K.R. Said to Be Favored in Panasonic Healthcare Deal | The private equity firm K.K.R. "is set to gain preferential negotiating rights for a majority stake in Panasonic Corp.'s healthcare unit, sources familiar with the matter said, a potential $1.5 billion deal that would mark the U.S. firm's largest investment in a Japanese company," Reuters reports.
