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I get my energy from this company. I wonder how that will affect me. This goes to show you what a colossal ####up leveraged buyouts often are. My employer was w

I get my energy from this company. I wonder how that will affect me. This goes to show you what a colossal ####up leveraged buyouts often are. My employer was worth 4B and had 1B in debt when it was LBO'd seven years ago. Now it is worth 4B and has 3.6B in debt. What a waste.

GFK_of_xmaspast 13y ago
Sounds like it's working as intended.
deleted 13y ago
[deleted]
arbuge 13y ago
Quite so. It always struck me that bankrupting an otherwise perfectly sound company (with all the attached negative consequences for customers and employees) is an inevitable risk of highly leveraged LBOs yet there seems to be little regulation/oversight in this space. Most people agree that capitalism and the free market can be taken too far - it's why the government regulates monopolies and big banks for instance - so why not regulate LBOs?
- nickff 13y ago
  I have three questions for anyone who wishes to regulate LBOs (or most other things): 1) What are the objectives of the regulation(s)? 2) How will these objectives be achieved (and what is the failure criteria for the regulator)? 3) Does the proposed regulator have a proven track record, or a system which is likely to produce success?
- hga 13y ago
  I'll add some more to nickff's comments: LBOs reallocates capital; a liquid capital market is thought to be a good thing. Our tax system massively favors capital obtained by debt. For all forms of capital you pay something. It gets complicated in our favorite situation where future growth prospects result in a rising stock price, but stock buybacks are taxed once (they come from profit), dividends are notoriously taxed twice (they're shareholder income), but the interest payed on debt is deducted as a cost of doing business. Before adding another regulatory epicycle to a system that's choking to death on them, perhaps consider reforming this perverse incentive?

GFK_of_xmaspast 13y ago

Sounds like it's working as intended.

deleted 13y ago

[deleted]

arbuge 13y ago

Quite so. It always struck me that bankrupting an otherwise perfectly sound company (with all the attached negative consequences for customers and employees) is an inevitable risk of highly leveraged LBOs yet there seems to be little regulation/oversight in this space. Most people agree that capitalism and the free market can be taken too far - it's why the government regulates monopolies and big banks for instance - so why not regulate LBOs?

nickff 13y ago
I have three questions for anyone who wishes to regulate LBOs (or most other things): 1) What are the objectives of the regulation(s)? 2) How will these objectives be achieved (and what is the failure criteria for the regulator)? 3) Does the proposed regulator have a proven track record, or a system which is likely to produce success?
hga 13y ago
I'll add some more to nickff's comments: LBOs reallocates capital; a liquid capital market is thought to be a good thing. Our tax system massively favors capital obtained by debt. For all forms of capital you pay something. It gets complicated in our favorite situation where future growth prospects result in a rising stock price, but stock buybacks are taxed once (they come from profit), dividends are notoriously taxed twice (they're shareholder income), but the interest payed on debt is deducted as a cost of doing business. Before adding another regulatory epicycle to a system that's choking to death on them, perhaps consider reforming this perverse incentive?