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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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. […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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: […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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. […]
Read more...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 […]
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