The Ultimate Bubble?
- Vanity Fair
At a lavish conference in Monaco, the game was guessing which big private-equity firm will be first to go bust. But the smoke and mirrors that wrecked the global economy might actually save the likes of K.K.R. and Blackstone….
More Fund Managers Take on Activist Role
- Wall Street Journal
Fund managers became more visibly activist in December, responding to a declining stock market by pressuring companies for better performance, observers said.
With fund values declining, managers are taking it out on company executives, because doing so "gives them someone else to blame for their misfortune," said Brad M. Barber, a professor of finance at the University of California, Davis, Graduate School of Management…..
Lynn A. Stout, a professor of corporate and securities law at the University of California, Los Angeles, said money managers with poor returns face pressure to act. "They have to do something to justify their existence," she said…..
Buyout Shops Swoop In for a Feast on the Cheap
- Wall Street Journal
…..With lending tight and the corporate-default rate expected to more than double next year to 8% to 10%, deal makers expect a pickup in transactions that look a lot like Real Mex. Instead of paying the fat premiums that were typical for equity stakes when times were good, private-equity firms and hedge funds now are wresting control on the cheap.
Such investors are buying distressed bonds or lending money, then taking over as target companies default or are strong-armed into ceding control to lenders. Unlike many banks, these investors often are eager to step in if things go sour, either in or out of bankruptcy proceedings.
"The credit-market party has ended, the refinancing music has stopped," said H. Jeffrey Schwartz, a lawyer at Dechert LLP. "The number of defaults will be unprecedented, and many companies with debt that's maturing or in default will be handed over to the debt holders."…..
Tags: Activist Investing, Bankruptcy, Blackstone, Carlyle, Cerberus, Hedge funds, KKR, Private equity
It’ll be interesting to see which private equity firms are able to navigate out of the leveraged holes they’ve dug for themselves. But it’s not as if they haven’t been there before. I suspect that KKR and Blackstone will survive through financial reengineering. Some of the others, not so sure.