Providence’s Altegrity looks to sell $1 billion unit: sources

Tuesday, July 2nd, 2013 | Finance News

By Soyoung Kim

NEW YORK (Reuters) - Altegrity Inc, owned by private equity firm Providence Equity Partners, is looking to sell a division that provides background checks for private-sector employers and could fetch up to $1 billion, two people familiar with the matter said on Tuesday.

A potential sale of the HireRight division comes at a tough time for Altegrity, as another of the latter's units, USIS, faces a U.S. government investigation over its 2011 background check into Edward Snowden, the National Security Agency leaker.

Unlike USIS, which is the largest private provider of federal government background checks in the United States, HireRight focuses on private-sector employers and provides employee background checks, as well as drug and health screening for companies.

A successful sale of HireRight could help relieve financial woes for Altegrity, which has struggled to pay down debt as revenue and earnings take a hit from government spending cuts.

HireRight - one of the world's largest employment screening providers according to its website - has around $95 million in annual earnings before interest, tax, depreciation and amortization (EBITDA) and could be sold for roughly 10 times EBITDA, one of the people said.

Bank of America Merrill Lynch is advising on the auction process, which has attracted private equity interest and is advancing to the second round, the sources said, asking not to be named because the matter is not public.

Representatives for Providence Equity declined to comment. Altegrity did not immediately respond to requests for comment. Bank of America did not have immediate comment.

Altegrity, which Providence bought from Carlyle Group LP and Welsh, Carson, Anderson & Stowe for $1.5 billion in 2007, also expanded its intelligence and security consulting business through its $1.13 billion acquisition of Kroll in 2010.

In April, Moody's Investor Service Inc downgraded Altegrity's debt deep into junk territory, warning that unless its revenue and earnings rebound significantly in the near term, its capital structure may be unsustainable.

Several private equity firms including Providence, KKR & Co LP and General Atlantic LLC bought businesses in recent years on the assumption that areas such as cyber defense and intelligence remained relatively safe from government spending cuts.

The theory has turned out wrong so far for most of these firms, which came under increasing stress because of defense industry cuts, including the sequestration that began hitting in recent months.

A series of apparent security problems that allowed Snowden to leak details of secret U.S. surveillance programs could result in increased scrutiny of government contractors, and further pressure the companies' revenues and margins.

Irvine, California-based HireRight screens more than 6 million applicants annually and counts about 50,000 employers as customers, according to its website.

(Reporting by Soyoung Kim in New York, additional reporting by Greg Roumeliotis; Editing by Bernadette Baum, Bernard Orr)

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Portugal gov’t in peril as another minister quits

Tuesday, July 2nd, 2013 | Finance News

LISBON, Portugal (AP) — Portugal's government was in danger of collapse Tuesday after Foreign Minister Paulo Portas, the leader of the junior party in the center-right coalition government, resigned over the bailed-out country's austerity policies.

Portas' announcement of his departure in a written statement came a day after Finance Minister Vitor Gaspar also quit.

Though Portas did not say whether his party would pull its support from the government, the resignations pitched what for two years had been a stable administration into disarray within the space of 24 hours. It recalled the political strife that has dogged Greece's efforts to recover from its own bailout.

The uncertainty about the government's future looked set to create a further headache for efforts by the 17 countries that share the euro currency to emerge from a financial crisis that has tormented them for more than three years, as austerity meets growing resistance from politicians, trade unions and business leaders.

Austerity is widely blamed for driving the jobless rate in Portugal to 17.6 percent and for what is forecast to be a third straight year of recession in 2013.

Portugal needed a 78 billion euros ($102 billion) bailout two years ago after a decade of weak growth and mounting debt pushed it to the verge of bankruptcy.

Portugal is now locked into a deficit-reducing program demanded by its bailout creditors — the International Monetary Fund and other EU countries. If Portugal doesn't abide by the terms of the bailout agreement, the creditors can halt disbursements of the rescue loans.

Portugal's government debt stands at almost 124 percent of gross domestic product, the third-highest in the EU after Greece and Italy. Its deficit last year was 6.4 percent — above the 5 percent target but below the 2010 figure of 10.1 percent.

Portas had repeatedly spoken out against former finance minister Gaspar's strategy of public sector pay and pension cuts and tax hikes. But Gaspar had the support of prime Minister Pedro Passos Coelho, head of the Social Democratic Party, the coalition's senior member.

Portas, who has demanded more measures to stimulate economic growth, said he disagreed with Passos Coelho's choice of Maria Luis Albuquerque to replace Gaspar. Albuquerque has endorsed the austerity which Portas wants eased.

"I respect (Albuquerque's appointment) but disagree with it," Portas said in the statement sent to reporters. He said that remaining in the government would be "politically unsustainable."

Portas did not say whether he would take his Popular Party out of the government — a step which would leave it without a parliamentary majority to push through its policies.

Passos Coelho's office said the prime minister would make a live television address to the nation later in the evening.

Portas's statement came out around 30 minutes before Albuquerque, the new finance minister, was sworn into office in a ceremony at the presidential palace and appeared to cause deep unease among Cabinet members attending the occasion, including Portas in his final official event. They declined to comment to reporters.

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French lawmakers quiz ex-HSBC employee who leaked client data

Tuesday, July 2nd, 2013 | Finance News

By Lionel Laurent

PARIS (Reuters) - A former HSBC employee wanted in Switzerland for leaking the details of tens of thousands of bank accounts gave evidence on Tuesday to French lawmakers trying to tighten rules against tax evasion.

Herve Falciani spent four hours describing ways he said the bank helped its clients sidestep taxes using various loopholes and exemptions under national laws, according to two Socialist deputies who met with him in closed session.

"Mr Falciani told us some extremely interesting things," said one of the deputies, Yann Galut. "He indicated to us ... various examples of dysfunction that we will now examine."

Galut and fellow National Assembly deputy Christian Eckert said they would use Falciani's information to help draft a new law to fight tax evasion.

"He said there were entire (bank) departments ... dedicated to staying one step ahead of the law and that we were not well-equipped enough," said Galut, praising Falciani as a whistleblower who revealed tax evasion on an "industrial" scale.

An HSBC spokesman said the bank could not comment on the hearing itself, as it had not been officially informed.

"In general, Mr. Falciani has made many statements but the only proven fact remains that he stole confidential data from the bank in 2008, a criminal offence under Swiss law," the spokesman said. "HSBC complies with the law in all the territories in which it operates."

Governments are cracking down on tax avoidance in the wake of the financial crisis, raising the pressure on countries such as Switzerland whose laws on client confidentiality make it easier for foreigners to hide wealth from the tax man.

French President Francois Hollande is under particular pressure to act after his budget minister resigned over an undeclared Swiss bank account in March.

Falciani caused a furor in 2010 when bank client data ended up in the hands of tax authorities in France, Italy, Spain and other European countries that later used it to try to recover billions of euros in lost taxes.

HSBC and Switzerland's UBS are now under investigation in France over whether they unlawfully sold products designed to avoid tax.

Falciani was in France after taking refuge in Spain from Swiss authorities seeking his extradition. He avoided being sent back to Switzerland when Spanish authorities ruled that the charges he faced were not considered crimes under Spanish law.

Galut said Falciani was cooperating with the French authorities and France's judiciary would go "right to the end" in its probe of HSBC.

Falciani, who has Italian and French citizenship, only gave a brief statement to reporters as he left the National Assembly building.

"The veil is only just beginning to lift," he said, sporting a goatee beard and patterned shirt. He said he had faced threats since leaking the bank account data, without elaborating.

(Reporting by Lionel Laurent; editing by Christian Plumb and Tom Pfeiffer)

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