Investors To Private Equity: Let’s Make A Better Deal

Date: Tuesday, July 24, 2007
Author: Hedge Fund Daily

Winds of change are blowing in the face of private equity firms as they are now discovering they have to make nicer to attract investors to fund their deals. The New York Times reports that p.e, firms have been forced to offer more attractive terms – such as higher interests, as Chrysler has done on $18 billion in loans to finance Cerberus Capital Management’s buyout of the U.S. automaker – as an estimated 15 to 20 offerings have been modified or put on hold until the firms yield to investor demands. “It’s the issuers who are over a barrel right now,” analyst Justin Monteith of KDP Investment Advisors, told The Times. “The market could go lower as people see how far they can push the issuers.” In the meantime, the lackluster enthusiasm for the loans to finance buyouts and bond sales have resulted in the delay of several major debt offerings ,including that of AllianceBoots, acquired by Kohlberg Kravis Roberts. According to The Times, citing figures from Standard & Poor’s Leveraged Commentary and Data, all told there are an estimated $235 billion in loans up for grab, almost all of for leveraged buyouts. KKR may be staring at a particularly bleak situation if credit begins to dry up, says The Times, as it is party to at least a half dozen deals that in the past month alone have been postponed, canceled or modified.