Leveraged Buyouts

The Comptroller of the Currency said today that banks should develop special policies for loans to pay for leveraged buyouts of companies as well as other transactions that involve taking on large amounts of debt. Comptroller Robert Clarke, in a memorandum to chief executives of the 4,600 federally chartered banks in the nation that was his first substantive comment on buyouts, defended the practice of bank lending for leveraged buyouts.

Chairman David Ruder, echoing the sentiments of Treasury Secretary Nicholas Brady, cautioned today that legislation to curb corporate leveraged buyouts could make stock markets skittish. Testifying before the Senate Finance Committee, Ruder said markets were "still skitterish and nervous" and could be made more so by congressional action on takeover activity. The committee is holding hearings on leveraged buyouts to determine whether action is needed to curb the activity.

Securities and Exchange Commission Chairman David Ruder told Congress today that tougher regulation of leveraged buyouts is needed so that the investing public is not harmed. The SEC chairman's comments to a subcommittee of the House Energy and Commerce Committee follow intense criticism of leveraged buyouts, particularly after the record $25-billion RJR Nabisco Inc. deal that lost bond investors millions of dollars.

Senate Finance Committee Chairman Lloyd Bentsen (D-Tex.) introduced a bill Thursday to limit the tax refunds that corporations can receive from leveraged buyouts. The bill is designed to prevent companies from receiving tax refunds when they generate large losses simply by taking on the huge debts that result from LBOs and major debt restructurings. According to a study by Kohlberg Kravis Roberts & Co.

Stein's column is a real analysis of the misery brought on thousands of workers who lost their jobs and careers through leveraged buyouts. Corporations are fulfilling their interest of making money on Wall Street with LBOs and have lost their interest in furthering research, development, and production--the key resources for perpetual economic growth of a country. The domino effect has already turned off students from getting an "unprospective" higher education. Universities are responding by reducing these faculties.

Kohlberg Kravis Roberts & Co., Carlyle Group and most other major U.S. buyout firms were accused in an investor lawsuit Wednesday of illegally conspiring to hold down the prices they pay when taking companies private. The suit was filed in federal court in New York by shareholders who claim they were shortchanged because the firms restrained bidding for leveraged buyouts such as the $33-billion takeover of hospital chain HCA Inc., the largest such buyout ever.

The chairman of the House Judiciary Committee said today that if the Bush Administration will not act, legislation may be needed to curb leveraged buyouts. "If the executive branch still refuses to act, then Congress must take the initiative by considering antitrust, bankruptcy and tax legislation to stop the LBO frenzy," said Rep. Jack Brooks (D-Tex.). He was speaking at a hearing on Campeau Corp.