US Private Equity Firms Denied of Federal Economic Help
US private equity firms, have mostly been denied of the relief funds under the CARES Act launched by the government to help businesses survive the ongoing crisis.
As soon as the government rolled out a relief package to support SMEs in the country survive the growing economic slowdown, the already rich private equity industry came running to grab a part of it. Seeing the intensifying efforts of the PE sector to get a piece in the federal stimulus package, the government quickly came into action to update the terms of the program.
The updation in the program has ruled out most of the PE firms seeking a share in the COVID-19 economic relief package. Now, only those firms with high debt levels will be granted the loans, whereas the big buyout firms owned by the US private equity will be cut off from the economic relief program.
PE Firms in the US, Actually Don’t Need the Financial Help
Whether the 🔗top private equity firms in the US deserve the federal loans under the recently launched CARES Act is a debatable question, however, it’s a fact that the PE business of Wall Street is among the most financially- secured at the moment. The talked-about industry, at present, is holding billions of dollars worth of spare cash, which it had raised in the past from pension funds and other big institutional investors.
🔗PE firms in the US own thousands of organizations, many among them being small or medium-sized while employing more than 9 million workers, as per the stats compiled by A.I.C and EY. In the year 2019, the US private equity industry invested approximately USD 300 billion in 4,788 different firms.
Carlyle Group, Among the Biggest Advocates of Having a Share in the Stimulus Package
According to the Carlyle Group, some of their portfolio firms in the aviation sector, which have been hit the hardest during the pandemic, must get economic relief loans under the CARES Act. Apollo Global Management too advocated for its rights to get economic relief under the federal relief act, which could provide some sort of benefit for its holdings.
American Investment Council, the US PE industry’s leading lobbying group, expressed its sentiments by saying that the firms backed by the PE industry are an integral part of Main Street America. And hence, they must be awarded the similar federal grants and loans that the other SMEs are getting.
However, so far, all such pleas have gone in vain.
PE Career Prospects Amid the Corona Pandemic
On a completely different note, those seeking to start their 🔗private equity career this year will be saddened by the lack of opportunities. But, there is hope for them in the latter part of the year, as the forecasts suggest, the economy is likely to revive by the end of 2020.
Meanwhile, the 🔗PE career aspirants can prepare for the upcoming vacancies in the private equity jobs, estimated to arrive in late 2020, or early 2021. Enrolling in an 🔗online private equity certification program would prove to be highly beneficial in the times to come.
U.S. Federal Reserve’s Updated Terms on the CARES Act
A week before, the federal reserve updated its policies and terms regarding grant of emergency funds under the program. From now onwards, lending limited to $600 billion can be provided to medium-sized businesses that are highly indebted. Despite the increased efforts by AIC to loosen the restrictions, a majority of PE firms that buy companies by borrowing big amounts in a loan will still be kept out of the relief funds program.
It’s called the affiliation rule that is keeping 🔗private-equity owned big companies out of the economic benefits attached to the relief stimulus package. The said rule, against which the entire PE industry has lobbied against, basically considers businesses owned by a single PE firm to be constituent of a conglomerate, instead of considering them as individual business entities.
And therefore, throwing them out of the economic relief program, considering the enormity of the size, and the amount of revenue collection. It straight away makes the big buyout firms fall out of the federal economic help program in the times of the crisis.
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