Filed under: Raising money, Private equity industry
I love when experts declare the obvious. Talking about the glut of private equity debt that investment banks are now looking to push onto investors, John Eydenberg, head of leveraged finance for the Americas at Deutsche Bank AG in New York, told Bloomberg that “the market can absorb all these deals. It is a question of time and price”.
Well, duh. But isn’t that kind of like saying that a store will be able to unload all those hideous, out of style clothes — it’s just a matter of time and price? Given an infinite amount of time and a willingness to sell at any price, pretty much anything can be sold!
And that’s the situation with private equity right now. Investment banks which must place billions of bonds to finance buyouts are having trouble finding buyers in the midst of the credit crunch. Banks are frequently offering investors bonds at a 5-10% discount to face value.
The difficulty banks are having in placing debt — and the extra yield investors are demanding — should prolong the slowdown in buyouts. And if investors aren’t eager to buy the bonds, investment banks won’t be eager to finance buyouts.
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