Wednesday, May 20, 2009

First PEU Failure?

Private equity underwriters (PEU's) lobby the Obama administration, saying they pose no systemic risk. Yet, the shadow bankers cranked up greed and leverage during their big deal days. A story on Springer Science indicates PEU's can fail, even cause a bank run from worried investors. It stated:

The sale comes as many in the private equity industry struggle with falling revenues in the companies they own while debt financing conditions deteriorate.

Candover is mulling a sale of all of parts of its business, having said in March it had run out of cash to invest in its own 2008 private equity fund, throwing the future of the firm into doubt.

Springer Science is facing a payments crunch on its 3.08 billion euro leveraged loan. The sale of the stake could help the company to reduce debt and give it the financial firepower to strike a deal with its banks.

Carlyle's David Marchick expressed concern to Congress over huge debt that needed refinancing from 2010-2014. The piper will need to be paid, one way or the other.