FATCA the matter is, expat$ will take a hit

Posted on December 16, 2012 by Ed Zwirn

by Ed Zwirn
Originally published on the NY Post – March 7, 2015. Read the original article here…

Last week it was reported that the search giant Google legally avoided $2 billion in income taxes worldwide by shifting $9.8 billion into a shell company in Bermuda, which has no corporate income tax.

But if you’re looking for the deal those big guys got, you can just forget it, thanks to FATCA — like fat cat, except you leave off the last “t” for “Tough luck, pal.”

FATCA, or the Foreign Account Tax Compliance Act, which takes effect Jan. 1, has the ostensible aim of cracking down on overseas tax havens. FATCA requires foreign banks to report US account holders to the IRS or face financial penalties.

But as in the case of Google, multinationals have resources to adapt to the law that individuals living overseas can’t hope to match.
Anecdotal evidence suggests that FATCA is already making financial life difficult for overseas Americans, over and above the possible tax bite. Some smaller banks are rejecting new and canceling old expatriate accounts, rather than spend the money to comply with the law. Mortgages are reportedly being denied or called in.

“Recent research suggests that the costs for each typical non-US bank to become FATCA-compliant could run to tens of millions of dollars,” says Nigel Green, chief executive of international consultancy deVere Group, which caters to expatriate clients.

“FATCA will dramatically reduce foreign investment in the US at a time when the economy is teetering on a knife edge,” predicts Green. “All this for the purpose of recovering $1 billion per year, which observers . . . say is only just enough to run the federal government for around two hours.”

Green says a number of his clients are considering giving up their US citizenship.

“Let’s say you’ve gone overseas and settled down and met a young lady, so perhaps you’re not going back to America,” he says. “It’s a nice passport,” he says many clients tell him. “But it’s not worth the trouble.”

AIG stock could hit a selloff

Posted on May 16, 2011 by Ed Zwirn

by Ed Zwirn
Originally published on the NY Post – March 7, 2015. Read the original article here…

AIG’s early repayment of its debt to the government this week may come as good news for taxpayers, but the outlook for investors is uncertain.

With the company’s exit of the risky CDS (collateralized debt securities) market that got it into trouble in the first place well under way, analysts agree that AIG is poised to prosper.

But Andrew Kligerman of UBS Securities said he’s not changing his neutral rating on AIG, currently trading at around $54, anytime soon. That’s in part because the company’s largest shareholder, the government, which now owns around 92%, is committed to selling its stake.
“It’s certainly a potential pressure point,” said Kligerman of the impending share selloff. The market values AIG at around $80 billion, and the government is planning to dump its entire holding within the next two years, some $15 billion to $20 billion of that between March and May, he said.

Even though Uncle Sam’s $29-per-share break-even point on the $182 billion bailout would seem to argue for a much lower AIG price, Kligerman believes that “the government would like to get out sooner or later, but in a very manageable manner,” being careful to avoid the accusation of selling off too cheaply, particularly during down markets.

In the meantime, ratings agencies are split on AIG’s creditworthiness.

Moody’s followed last week’s announcement of the accelerated repayment by downgrading the company one notch, arguing that AIG should be evaluated as a stand-alone.

Standard & Poor’s took the opposite tack, sticking to its A- rating, arguing AIG deserves “one notch of uplift from the stand-alone credit profile because of the continued implied support from the US government.”

PE doesn’t hobble bankrupt firms: Moody’s

Posted on November 14, 2010 by Ed Zwirn

by Ed Zwirn
Originally published on the NY Post – Nov 14, 2010. Read the original article here…

As the MGM bankruptcy makes its way through court, equity holders in the fabled film studio may be taking a hit, but investors who provided debt financing when the company was taken over in a 2005 private-equity deal are apparently sitting somewhere over the proverbial rainbow.

The studio, which has given us movie icons from Dorothy to James Bond, has been struggling under the weight of massive debt even as its sole business, the making of feature films, suffers due to declining DVD sales and a broader weak economy.

But contrary to the widespread perception that private-equity takeovers bleed their target companies dry, the evidence seems to be that these deals have weathered the storms of the past few years as well as their public counterparts.

“Private-equity firms have managed the defaults of sponsored companies to generate average firm-wide recoveries in the upper 50% range, in line with recoveries for companies without private-equity backing,” writes Moody’s Investors’ David Keisman.

Keisman, who analyzed private-equity deals from 2008 through the end of October, says that the swapping of distressed debt and the use of bank debt have been “key supports” for recoveries in defaults of PE-backed companies. “These firms have weathered the storm as well as those lacking private-equity involvement.”

This appears to be the deal in the case of MGM.

The studio, which filed for Chapter 11 protection earlier this month, has said in its public filings that it expects to emerge from bankruptcy by the end of the year.

It is also not without valuable assets, having a 4,000-title film and television library including “The Wizard of Oz” and “Gone With the Wind,” which should continue to bring in revenue over the years.

The studio is due to appear Dec. 2 in US Bankruptcy Court, Southern District of New York, where it hopes to obtain approval of its plan to restructure some $3.5 billion of debt. This debt is to be converted into equity, giving holders most, or all, of the equity in the reorganized company, according to the plan.

Traders fueling profits

Posted on August 15, 2010 by Ed Zwirn

NY Post image

by Ed Zwirn
Originally published in the NY Post – Aug 15, 2010. Read the original article here…

BIODIESEL Yo no soy.

The only green being made in the “green energy” biodiesel market appears to be by traders who never touch the fuel.
Biodiesel is a fuel mixture of soy and diesel, which according to federal officials burns cleaner than straight diesel fuel in cars and trucks.

The world economic slowdown and the expiration of a $1-a-gallon federal excise tax exemption at the end of last year have combined to hit the industry hard.

Experts estimate that no more than 300 million gallons of fuel will be produced in 2010, down from the peak of 700 million in 2008.
Despite this production plunge, federal renewable fuel standards require the blending of 650 million gallons of biodiesel into the nation’s fuel mix this year.

But without the tax credit, and with energy traders driving up the futures market in biodiesel production, fuel producers trying to fill the federal quota are finding no buyers for their product.

Biodiesel produced in Idaho currently fetches about $3.20 a gallon, while diesel produced by nonrenewable petroleum unloaded in New York Harbor goes for $2.20. That means biodiesel blenders are losing money, though traders are not.