Ferretti 145/150

[EME]

I did understand , BUT...

Does that mean if I set myself up as Pension Fund rather than as a simple Limited Company , I will be more successful at what I do ? Then again if I do a leveraged buy out of the company as myself by myself as my pension fund will I be able to afford a mega-yacht?

If so I can guarantee you a 1% brokerage fee .. but then again 1% of FA is not a lot.

(Only joking)

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[jfm]

Learner Pensions, Inc

Yup, you've gottit ......I think, except I dont get out of bed for less than 2.5%

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[MapisM]

Naive?

With regard to your first point, yes, I understood that you were making such association, my fault.

But for the rest, let me try to make an example.
And may the Lord have mercy upon my soul for that, but it's late, I can't sleep, and the TV is awful.
And before anyone suggest alternatives, SWMBO is sleeping!

Company X is for sale, and its price is 100.
Permira (or whoever else - let's say Learner for example) creates a new company Y, and puts a share capital of 10 in it.
Y makes a debt with the banks of 90, guaranteed by X, which pledges its own assets in favour of the bank.
Y now has a cash of 100. This is used to pay the buyer, who sells X to Y.
Needless to say, besides having guaranteed the debt with its assets, X is the company who will repay the debt and its interests, because Y is just an empty box.
Learner is now the proud owner of X, a company worth 100, and he pulled out just 10.
When he will decide to resell X, even assuming that X in the meantime didn't grow, but was just able to repay the debt, he will cash in 100.
Learner's capital gain will be 90. Depending on how he has established Y, that'll probably be tax free.

Admittedly, this is a rough simplification.
Usually a "senior facility agreement" - isn't that an elegant definition for a debt, by the way? - is worth a team of lawyers and a pile of 300 pages or so. But it does work that way.
Not to mention that even those lawyers' fees are paid by X, not by Learner.

So, naive as it might be, I insist. Learner bought X, and X paid for itself.
That's how private equity works.

Besides, c'mon, let's not bring the pensioners' savings into this picture...
Those who get most of the profit from this game are the partners of private equity firms.
Would you maintain that Damon Buffini and his team are living on their pension?

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[jfm]

Yes, very naive

You seem not to want to let the facts get in the way of a good rant, especially a rant that looks motivated by envy

So, if I take out a bank loan (mortgage) to buy a flat, and I rent it out, and the monthly rent I receive is £1000, and the monthly mortgage cost is £1000, the flat "pays for itself". I dont have to use my own savings at all. Is there something wrong with that? Am I not allowed to use the investment income to pay down the mortgage? This happens every day a million times over.

Think of it another way. Let's say your company X did not "pay for itself". Let's say that Learner dipped into his own pockets to repay the bank debt, so company X was left alone. I sense that would make you happy (?). But then the dividend/profit Learner gets from company X would be 90, not zero, because X is no longer an indebted company. Then when X is sold for 100 as in your example, Learner still makes a profit of 90. So, erm, it's exactly the same result.

On the tax-free thing, I already explained that pension funds are meant to be tax free. Parliament decided this, that's good enuf for me.

Re your last para, leave pensioners savings out of the picture if you want, discard whatever you dont want to hear. But the capital in these deals is pensioners' savings and most of the profit goes to them, not to private equity firms. And of the (small%) profit share they typically give to the pe firms, they do that voluntarily, no-one forces them to sign up to this method of fund management. Do you want to ban this or something?

You're right on one thing - the bank debt agreements do tend to be 300 pages long and cost big legal fees. If you know any banks that will lend a billion dollars over the telephone or using a 2 page on-line application form, let me know

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[MapisM]

Envy?

This is leading us nowhere, I give up. But don't worry for myself, I'm not envious at all.
Each and every point I raised was based on experience, not heard from someone else or read on a newspaper.
In fact I had, and I'm still having, the opportunity to make some nice profit for myself out of this game.
As I guess you've had.
But I'm considering myseld a lucky b*!!*!d in this respect.
I don't pretend I am going on a charity mission on behalf of the pensioners.
Feel free to look at that in this way if you want.

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[petem]

Ahem.....

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Fiat + Alfa Romeo who build driving positions for non-human shapes

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Me and Mrs PeteM own a Fiat and an Alfa and find them the most comfortable cars ever made!

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