Wednesday, April 29, 2009

PEU's Look to Buy Distressed & Good Banks

Kings of private equity have their eye on banks, the good and the struggling. Thomas Lee said his two firms are exploring bank deals. Bloomberg reported on his thinking:

“We’ve looked at several different platforms,” Lee said. The U.S. government is willing to provide financial assistance for bank deals, he said.
Thomas Lee isn't the only private equity underwriter (PEU) interested in bank deals.

Buyout investors including Washington-based Carlyle Group and J.C. Flowers & Co. and Blackstone Group LP in New York have said they’re interested in buying banks at discounts.

PEU's rely on leverage to do their thing. Carlyle's David Rubenstein made this very point on the sidelines of the SuperReturn Conference in Miami. With lending knotted up, Uncle Sam provides the financial assistance, aka leverage. Once PEU's own banks, they can get more financing (leverage) through their captive affiliate, at least until they flip them for huge profits.

Will they then cram down their debt holders while getting a Congress supplied $25 billion tax break? History can repeat itself. Something stinks. It's a combination of PEU's and the Government Industrial Monstrosity, Eisenhower's MIC on steroids.