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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...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 […]
Read more...The IRS is turning up the spotlight on hedge funds and private equity firms. It appears that some may have been taken what might politely be called overly aggressive tax positions. It’s going to be pretty hard for these captains of capitalism to convince the public that they need to keep their favorable tax treatment […]
Read more...The New York Times today, in “More Profit and Less Nursing at Many Homes,” describes the often shameful behavior of private equity owners of nursing homes towards their charges: Some excerpts: As such investors have acquired nursing homes, they have often reduced costs, increased profits and quickly resold facilities for significant gains. But by many […]
Read more...In a March post, “Private Equity’s Image Problem,” we expressed considerable reservations about Blackstone’e effort to form a lobbying group (the Private Equity Council) to among other things, press for the continued favorable tax treatment of carried interest, and specifically, the approach taken by its leader. From that post: So the industry could use some […]
Read more...The Wall Street Journal’s Deal Journal quoted veteran deal hand Steve Rattner, now DLJ’s head of merchant banking, taking a comparatively upbeat view of the difficult conditions in the LBO market: Yes, “the oversupply is the worst we’ve ever seen,” said Rattner, whose private-equity fund closed last year with $2.1 billion of capital. “The market […]
Read more...The Financial Times’ Lex column today takes issue with those who take comfort in the oft-quoted statistic that default rates are at a 25 year low. The article shows a long-term, unrelenting decline in average ratings and notes that bond defaults tend to peak two to four years after issuance. We’ve had an increase in […]
Read more...In case you haven’t come across it yet, I highly recommend the blog Overcoming Bias, where a number of academics write about epistemology. Given how we are bombarded with new factoids, studies, and commentary on a daily basis, it’s helpful to consider the views of those who think about the nature of knowledge and the […]
Read more...Nouriel Roubini, on his RGE Monitor, discusses the distinction between risk (variability in outcomes that can be estimated) and uncertainty (unknown or unmeasurable outcomes). Risk can be priced; uncertainty can’t (or at least can’t be priced by rational agents). Roubini argues that part of the panic in the markets stems from the fact that investors […]
Read more...Bloomberg reports that analysts at Sanford Bernstein estimate that Citi will suffer up to $3 billion in losses this quarter due to subprime and LBOs writeoffs: The New York-based company may lose between $1.2 billion and $1.5 billion on loans to buyout firms and between $500 million and $1 billion on subprime mortgages in the […]
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