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Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen My Amazon Authors' page Twitter:@ jacolineloewen Linkedin: Jacoline Loewen Profile

November 3, 2010

Private equity accessing debt again

Private equity is using debt again. While it is harder to get a home loan or small business loan, large companies and private equity, established players can access cheap bank debt. The US is showing how with its large players - Carlyle and Blackstone. There is a radically different view by each of these giants, but I believe that shows the health of PE and its ability to bring different views to their business. Take a look:

Blackstone, in reporting a 23 percent jump in third-quarter earnings, said it had found the market to buy out companies unappetizing. “There are some good companies being sold, but we just can’t get to the prices that are required,” Hamilton E. James, the company’s president, said Thursday morning.
Carlyle, though, is gobbling up companies. Not long after Mr. James’s bearish comments, Carlyle announced a $2.6 billion deal for Syniverse Technologies, a voice and data services provider for telecommunications companies. On Wednesday, it completed a $3 billion takeover of CommScope, a maker of telecommunications equipment.
The divergent approaches highlight how cheap corporate debt is fueling the recovery of the private equity business. While it remains difficult to get a mortgage to buy a home or to get a loan to fund a small business, yield-starved investors are creating a robust market for corporate bonds and loans.
Private equity firms are seizing upon the corporate-debt boom in myriad ways. For the debt-heavy companies they already own, Blackstone and Carlyle are improving their balance sheets through aggressive refinancing. Corporate loans are now available to do multibillion-dollar buyouts, too, but the easy lending environment has created fierce competition for takeover targets, driving up prices. The corporate loan market “is almost hard to believe,” Mr. James of Blackstone said.
Private equity’s outlook is certainly brighter today than it was one year ago. Buyout firms have made $173 billion worth of deals this year, up 95 percent from last year, according to data from Thomson Reuters.
Blackstone, co-founded by Stephen A. Schwarzman, may be reluctant to do deals at the moment, but its earnings report underscored just how favorable the environment has become. The New York-based firm, with $119 billion in assets under management, said its third-quarter profits were bolstered by sharp increases in the value of its real estate holdings.

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