Category Archives: Private equity

Price on LBO Loans Falling Due to Pressure From Iceland Liquidations

Banks stuck with unsold inventory of LBO loans have maintained a fair degree of market discipline, attempting to offload the paper at favorable prices and engaging in financing the sales rather than taking bigger haircuts so as to avoid further writedowns of still-unsold paper. The sale of LBO paper held by Iceland’s failed banks and […]

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Troubled LBO Loans Nearly Triple

The other shoe, as in real economy symptoms of the credit crunch, are starting to show up. One that was widely anticipated was rising default rates in private equity loans. This last cycle was particularly overheated, with not only the predictable peak-of-cycle high prices, which therefore implies high debt levels to make the private equity […]

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TPG Makes Concession to Facilitate WaMu Raising Capital

The Wall Street Journal reports that TPG, which invested over $7 billion in the nation’s largest thrift, Washington Mutual, late last year. gave a waiver which would facilitate an investment or sale. WaMu earlier was reported to be considering selling branches and deposits, but how viable the remaining business (credit cards, plus the mortgage assets) […]

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Value of Lehman Ex Asset Management Business May Be Negative

According to reports in the New York Times and Wall Street Journal, Lehman is shopping its asset management business, which includes Neuberger Berman (purchased for $2.6 billion in 2003), its private client brokers, and Lehman Brothers Asset Management. Now look at the valuation of the asset management business versus Lehman as a whole. From the […]

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Blackstone Uses Own Hedge Fund As Stuffee for Its LBO Debt

When I read this Bloomberg story, “Blackstone Risks Hedge Funds’ Return as LBO Lending Evaporates,” my first reaction was “conflict of interest”. My second was “lawsuit”. Everyone casts a blind eye at arrangements like this until the returns falter. My third was that everyone interview seemed extremely reluctant to say anything critical of Blackstone. That […]

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Commodities Spike, Scarce Credit Hitting LBO Companies Hard

The Financial Times reports on a new, troubling credit crunch phenomenon. Companies carrying a lot of LBO-related borrowings walk a tightrope since the high debt burden gives them little room for error. But in this downturn features an unanticipated rises in raw materials, plus in some cases, cuts in credit facilities that were important buffers. […]

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Fed Considering Relaxing Rules on Private Equity Investment in Banks

We’ve mentioned from time to time the Fed’s fantasy that banks could recapitalize in short order. John Dizard of the Financial Times has been the most blunt in describing the disconnect between the central bank’s wishes and reality: It is not fair to say the Fed does not have a plan. It does. The plan […]

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Blackstone Chief Calls Credit Recovery "Eye of the Hurricane"

Blackstone President Tony James said it may be premature to label the credit crisis over, although he did point to improving conditions in the market for LBO-related debt. However, one also has to wonder whether this call is to lower expectations for Blackstone’s performance, given the firm’s dreadful first quarter results. Oddly, Bloomberg reports the […]

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Thomas Lee: No Big LBOs for at Least a Year

Thomas Lee, one of the greybeards of the private equity business, predicted the absence of very large acquisitions for at the next year due to the deep freeze in the securtization market. The top tier of deals depended on funding via collateralized loan obligations, which Lee does not see returning any time soon. From MarketWatch: […]

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TPG to Invest $5 Billion in Wamu

Private equity funds (except for specialists like Chris Flowers) seldom make investments in banks, and for good reason. They are regulated businesses with complex, integrated overhead structures that don’t lend themselves to the sort of cost cutting and breakups that are easy ways for LBO firms to unlock value. On the one hand, with sovereign […]

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