House Republicans have discussed eliminating the interest
deduction provisions on corporate debt that allows companies to
reduce the amount of taxable income. If the provision was
removed, it would be those who have based their capital
structures on the fact that interest is tax deductible - the
high yield (HY) and leveraged buy-out markets (LBO) –
that would be hit the hardest.
"It is one of the big real issues that hasn't got much
attention, and arguably it should," said a director in the
debt capital markets (DCM) team at a major international bank.
"If it actually took place, it would really devastate the LBO
market, because they are largely funded by debt which is tax
The market has taken the proposal seriously, according to
Jared Rusman, partner at
Kirkland & Ellis.
"When the proposals came out, people who borrowed a lot,
private equity sponsors in particular, were quite