Category Archives: Private equity

Harvard, Other Big Endowments Selling Private Equity Stakes at Big Losses

A year ago, major endowments, like Yale, Harvard, and Princeton were seen as the ne plus ultra of sophisticated private investors, regularly posting 20%+ annual returns. Now they are dumping big chunks of their private equity holdings at distressed prices. What gives? The reason this is odd is that the last thing you want to […]

Junk Bond Yields Up Sharply

We’ve noted from time to time that one of the many reasons this downturn will prove to be exceptionally bad is not just that corporate defaults are likely to equal, if not exceed, past post-war peaks. Two new factors are at work that will hurt junk bond holders. First, many of the recent leveraged buyout […]

Surprisingly Superficial New York Times Article on Troubled Private Equity Deals

A story by Andrew Ross Sorkin and Michael de la Merced, “Debt Linked to Huge Buyouts Is Tightening the Economic Vise,” covers the fact that private equity deals, which as a matter of course feature high leverage, are starting to hit the wall as the economy sours. This is hardly surprising; it’s happened in past […]

Loan Market Suffering Sharp Writedowns

While all eyes have been fixed on the interbank market, and the plunge in the Baltic Dry Index has also garnered some attention, the sudden decay in the loan market (meaning for the most part leveraged loans, the sort used to finance LBOs) has gotten far less commentary. Yet this will wreak havoc on bank […]

AIG Asset Sales Going Slowly

More cheery news on the credit crunch front. Readers may recall that AIG entered into what was initially an $85 billion and was later increased by $38 billion with no further strings attached. The terms of the initial loan are pretty punitive, with the government loan having a two year term, a high coupon, and […]

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 […]

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 […]

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) […]

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 […]

NewSpeak Watch: What Does "Sale" Mean? (LBO Loan Edition)

Ah, how distant early 2007 seems. Remember how the private equity business was going gangbusters, M&A was at record levels, and no deal was too big to get done. Then the credit markets hit the wall, leaving a lot of investment banks holding LBO debt that they hadn’t sold (the most common mechanism had been […]

Goldman Raising $10 Billion Fund to Invest in LBOs

I must be missing something here. Not too long ago, Goldman was wiling to act as a principal in LBO financings for deals the firm did and would then syndicate the deal. Now admittedly that was the sign of a bull market peak, that an investment bank would take that sort of risk, but bear […]

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 […]

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. […]

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 […]

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 […]