10 QUESTIONS ABOUT GOV. WALKER’S ‘DISTRESSED DEBT’
Some companies in the middle of developments are Caelus Energy’s Nuna project and Brooks Range Petroleum’s Mustang Project. Then there’s Blue Crest Energy’s Cosmopolitan site in Cook Inlet. The combined development of these three alone would bring 25,000 barrels or more per day by 2018.
“It doesn’t work without the tax credits or some type of incentive,” said Benjamin Johnson of Blue Crest earlier this year. “We know that we have large amounts of resources…These resources need to be developed. The tax credits are really critical to make sure that that’s done.”
They have all been stiffed on their tax credits by Walker and the Democrats in the Legislature.
Now, the governor is asking the Permanent Fund to pay for something the General Fund owes. This means using the Permanent Fund corpus to pay for government itself.
SIMPLE QUESTIONS FOR A COMPLICATED TRANSACTION
Our resident private equity underwriting expert puts it this way: The tax credits Governor Walker wants the Permanent Fund to buy are what is known as a distressed investment. They’re distressed debt, to be more precise.
3. What makes this one unique? What’s odd is that we have a governor who has simply stopped payment. This same governor is now courting the Alaska Permanent Fund, which is our own sovereign wealth fund, to pay for something the operating budget owes.
What’s more, if the Permanent Fund buys a major portion of these distressed tax credits, then the governor will know the price the Permanent Fund paid.
He then has all the information on both sides of the transaction, as he has two commissioners and a former commissioner sitting on the board Permanent Fund Board, one of whom is the commissioner of Revenue, which approves the credits in the first place.
Revenue Commissioner Randall Hoffbeck would be both in charge denying the payment of them (as part of the governor’s inner economic circle) and now deciding if the Permanent Fund should buy them.
Companies that specialize in this bottom-feeding trading are sometimes referred to as vulture funds. Carlyle has not specialized in distressed debt up until two years ago when the firm, owned by David Rubenstein,(husband of one of the governor’s economic advisors, Alice Rogoff) purchased debt in Texas Competitive, a failing utility. Rubenstein bought the debt at a discount, with the plan of making good money when restructuring took place.
The speculation is that Carlyle is looking to buy up distressed companies at the same time advising the State of Alaska on how to restructure its debt through the Permanent Fund. Rubenstein, speaking about distressed energy companies at international conferences recently, said this will be a target-rich environment for investors.