Proactive Recommendations to Private Equity Sponsors During Debt Ceiling Uncertainty

Paul Hastings – Like other enterprises that raise and spend capital, the federal government finances its spending in part through the issuance of debt. The federal debt limit is the maximum amount of money the government is allowed to borrow to meet legislatively mandated spending obligations. The Bipartisan Policy Center projects that, absent legislative action, the U.S. Treasury will be unable to meet current obligations sometime between early June and August 2023. Treasury itself has warned that day may come as early as June 1. If the government reaches the debt limit without amendment, it will no longer be able to borrow money, and it would inevitably default on certain of its obligations.

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