PTPs: Rod James investigates whether publicly traded partnership transfer restrictions could impede secondaries sales, once that market gets its engine going again. (US law says that a fund is categorized as a PTP and taxed as a corporation if interests in it are readily traded on a secondary market.) Rod points out some ‘safe harbors’ for PE funds can take in order to avoid being designated a PTP.
Worth a read, especially if you manage a fund with a backlog of sellers who wanted to trade in 2019 but couldn’t.
Downscaling: Oil prices pretty literally went through the floor Monday, recovering a bit Tuesday. But for a while futures were negative, so I guess it’s too bad buying it can kill you. Just one of the many other bad things about the oil price crash is that it’s driving some small crude producers – many private equity-backed – toward bankruptcy or restructuring, as PitchBook reported yesterday. (Publicly traded Diamond Offshore missed an interest payment last week and has reportedly hired advisers for a potential restructuring). My colleague Connor Hussey tells me that its making some firms with heavy oil and gas portfolios do serious thinking about their own futures. One CFO recently told him that, should this historical dynamic continue for much longer, “We enter a world where we start shrinking as a firm.”
Email prepared by Graham Bippart