Not only is Blackstone lookiing for other than traditional bank financing, but so too are Carlyle’s David Rubenstein and Terra Firma’s Guy Hands. And unsurprisingly, sovereign wealth funds are among the deep pocketed firms being approached.
Private equity firms are now approaching
sovereign wealth funds for loans for big leveraged acquisitions, filling the gap
left by investment banks struggling with the credit squeeze, leading buy-out
bosses said on Wednesday.Guy Hands, head of Terra Firma, and David
Rubenstein, head of the Carlyle Group, told the Super Return conference in
Munich that private-equity firms were already talking to wealthy state-backed
funds in the Middle East and Asia about raising debt
“Effectively you will just intermediate
Wall Street and the City of London out of the picture,” said Mr Hands. “It
is already happening.” He said the Abu Dhabi Investment Authority (ADIA), the
world’s biggest SWF, “will effectively replace Wall Street”.Mr Rubenstein said: “One thing you can
say about business is that whenever there is a vacuum, people go in to fill
it.”He said there were four main sources of
alternative debt financing: SWFs, public pension funds, hedge funds and mutual
funds. “I expect you will see some more of this,” he said.However, the Carlyle boss said the vacuum
was unlikely to be filled by alternative debt investors for long. “I don’t
think you’ll see them in this for the long term, as the returns are not
attractive enough,” he said, predicting that once banks had recovered from the
credit squeeze they would edge out the newcomers again with cheap debt.David Bonderman, head of TPG Capital, said:
“Banks have become a much less important provider of debt, less so in Europe,
but notably in the US.” He presented a graph showing that less than 20 per
cent of US LBO debt was held by banks.
Private equity turns to sovereign funds – Financial Times
Tags: Carlyle, Private equity
