Category Archives: Private equity

"Citi allows loan ‘cherry picking’"

As told in the Financial Times, LBO groups interested in buying leveraged loans on offer from Citi are able to select the assets they want, rather than buy pieces of the package, as Citi had planned. I rarely take issue with the FT, but in this case, particularly in its choice of headline, the pink […]

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: […]

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 […]

Private Equity: "Nothing More than a Clumsy Trick"

It’s remarkable how otherwise sophisticated individuals want to believe in magic bullets. If they get a horrific illness, surely there must be a treatment somewhere that will restore them to health. Similarly, some investors know how to tease superior returns on a consistent basis out of highly efficient markets. Now I am willing to accept […]

Zombies Stalk Private Equity

Well. at least we have a new addition to the finance scene that isn’t an acronym. A zombie deal is what happens when a LBO transaction with a cov-lite loan goes bad. Recall that “cov-lite” was a sign of how frothy lending conditions had gotten. Just think, a mere year ago, a private equity firm […]

Banks Cut Unsold Buyout Loan Inventories

A bit of good news on the generally gloomy credit markets front: banks have managed to unload some of the LBO loans they have held on their balance sheets. Admittedly, however, they still have great deal more to place, nearly $130 billion of buyout debt. However, they have had to offer large discounts. Recent reports […]

Banks Advised to Renege on LBO Commitments

Ohh, the plot thickens. Investment banks are choking on unsold inventory of LBO loans that appears destined to continue to fall in value. These deals are already underwater and expected to hear further south. The interest payments float off short-term interest rates. so the widely anticipated Fed rate cuts will make them even less attractive. […]

Leveragd Loan "Disarray" = More Losses for Wall Street

The Financial Times reports that selling group discipline broke down on a $14 billion loan syndication for the acquisition of Harrah’s by Apollo Group and Texas Pacific Group. Buyers are unresponsive, a big problem for Wall Street, which is sitting on $150 billion of inventory that is already considerably underwater. Ironically, the interest rate cut […]

Credit Crunch Collateral Damage: Deal for Credit Card Processor on the Rocks

Blackstone’s pending $6.4 billion acquisition of Alliance Data Systems, a major credit card processor, may become an unexpected victim of the credit crunch. The deal is foundering not for the usual reasons, such as difficulty in raising debt financing or a change in business conditions leading the buyer to try to renegotiate the deal. In […]

Hedge Fund and Private Equity Managers to Take it on the Chin

Roger Ehrenberg’s latest post, “Alternative Asset Managers and Down Market Cycles: What to Expect,” isn’t quite as blunt as my headline above, but it comes pretty close. He at least says that suffering, while common, will not be universal. Cheap funding was important to the success of hedge and LBO funds and its evaporation will […]

Moody’s Takes on "Aggressive" Buy-Out Artists

The ratings agencies are newly emboldened, or perhaps feel the need to look tough where they can to make up for their tattered reputations elsewhere. The latest salvo: Moody’s has announced that it will take a haircut to the debt ratings of companies owned by buyout firms that engage in “aggressive” financial strategies. The more […]

Investors Making It Costly To Modify Leveraged Loans

I somehow missed this Bloomberg story last week, but it’s sufficiently important that I thought I should call it to your attention. Investors have decided that they are sick of being chumps and are now demanding newly-high financial concessions to change the terms of takeover-related debt. Bloomberg attributes the tough-mindedness to the losses investors have […]

"Banking system’s problems at heart of the bear case"

The Financial Times’ Tony Jackson admits to having come to a bearish propensity from having trained under the dour Scots, but nevertheless thinks that pessimists, at least as far as the near-term economic outlook is concerned, may have a point. Jackson goes through a quick and dirty list of Things That Could Cause Trouble. While […]

"Citigroup, Goldman Cut LBO Overhang With Discounts Up to 10% "

We had a story earlier this morning on hard times in the financial services industry, but this merited separate comment. There is no institutional memory on Wall Street. In superheated M&A markets, investment banks start providing bridge loans even though they should know better. Inevitably, the party ends, credit markets back up, and the securities […]

Are Those Private Equity Guysas Smart as They Say They Are?

Andrew Ross Sorkin of the New York Times questions the acumen of some of the top deal shops as they attempt to extricate themselves from recent deals: Private equity firms have recently been reneging on their billion-dollar buyouts as if the deals came with a 30-day money-back guarantee. They don’t. But that hasn’t stopped the […]