Wer soll das bezahlen?

Further reaction to the European “shock and awe” stabilisation package this time from Marc Ostwald of Monument Securities who says there are lots of unresolved issues....

Towards a United States of Europe

From Berlin, via Reuters, on Monday morning:



Stopping the wolfpack (updated)

While we await details of the EU’s emergency lending mechanism and loan guarantee package for troubled countries – a statement is expected around 21.00 hrs (GMT) –...

Have We Forgotten About 2007 Already? (Also, Goodbye, peHUB!)

I started covering private equity at Thomson Reuters two and a half years ago, right around the time a black cloud descended upon the industry. It was the fall of 2007: Blackstone Group had just gone public, Newsweek had cursed private equity by affording it the cover, and the credit crunch was settling in for a nice, long winter.

I couldn’t have picked a worse time to dive into the industry.

The collapse of private equity brought me on a pretty dark ride, from the pendulum of stress and Henry Kravis’ cold heart to reCrapilizations and fundraising purgatory.

In the past two years, I’ve gotten to write headlines like Merry Christmas, Your Firm May Fail and There’s More Than One Way To Spell “Jackass”. * I’ve badgered firms like Sun Capital, Apollo Management, and American Capital. I documented layoffs, clawbacks and writedowns, and covered PE-backed bankruptcies in meticulous detail.

Basically, things got ugly.

Two and a half years later, I’m leaving, and so is the black cloud. My stories of impending doom read like they were written in another era. The unthinkable is happening. Private equity, it seems, is back on top, with almost no bruises to show for its mistakes.

Larger and larger deals are being struck with cheaper debt and capital structures resembling those of boom-era deals. We’ve seen the brazen return of staple financing, PIK toggles, second lien loans, and covenant light terms.

Meanwhile, large buyout firms were able to fend off the “wall of debt” facing their overleveraged portfolio companies with the amend and extend phenomenon of last year. Private equity lost a small percentage of its portfolio companies to bankruptcy, not nearly to the extent some predicted. This year the LBO-backed bankruptcy list, typically a goldmine of writing material, has dwindled to a less-than-newsworthy trickle of one or two companies a month. Other than Chrysler, the mega-buyouts have not crumbled. Half of them are gearing up to IPO!  Meanwhile buyout firms across the board wrote up their portfolios at the end of 2009. Before you know it, Steve Schwarzman will be throwing lavish birthday parties all over again. (To this I say: Never Forget!)

It doesn’t seem fair, after all of those dividend recaps and risky capital structures and irrationally frothy auctions, that private equity, particularly the mega-firms, could come out unscathed. It reminds me of when you run into that horrible bully from your high school, the one you like to imagine is bagging groceries in some dead-end town. But it turns out he ended up with a great family, successful career, and an all-around happy life. Conventional thinking (and the teen movie canon) teaches us that that guy always gets his comeuppance. Not so in the real world, and not so in private equity, apparently.

Perhaps private equity can thank the lobbying forces of the PEC, or the half-hearted rage of LPs that appears to be settling for modest compromises on fees and terms. There’s also that lovely “private” aspect of the industry, and lastly, the built-in long term nature of the business. In recent months, private equity has confounded me with its resilience, or perhaps infallibility, or perhaps its dumb luck. Either way, you all are not going anywhere.

*For the record, there are a number stories I wish I had had time to write over the years. Their headlines, from my rainy day file, include:

This Debt Thing is Getting Out Of Control People

Either KKR is Lying or I’m Clueless

Checking For A Pulse: Have You All Given Up On M&A Altogether?

Zombie Companies Have A Debt Wish

Go Ahead, PIK Your Toggle

IFRS: Your New Best Frenemy

Stop Naming Your Firms After Subdivisions, Star Signs and Latin Phrases

So with that, I bid peHUB adieu!

Head in the sand at the ECB (updated)

European Central Bank President Jean-Claude Trichet’s performance at his press conference in Lisbon on Thursday did not win many plaudits, in the face of the eurozone’s debt crisis....

The hedge funds are watching us…

Okay, maybe not ‘us’ as in FT Alphaville, but they are watching some other financial blogs.

From Tim Human at the Cross Border Group:

Data firm monitoring influential...

It’s Wall Street reform action day

Thinking of waving a flag for capitalism outside the New York Stock Exchange on Thursday?

Showing off your newly-acquired Rolex in Wall Street favourite Ulysses?

Or perhaps driving...

Pru/AIA – a whiff of death

The price action in Prudential shares on Thursday morning.

Clearly the market is delivering its verdict on the likelihood of the $35.5bn acquisition of AIG’s Asian arm going ahead....

Moody’s in hooker heels

Here’s a topical cri de coeur on credit ratings agencies, from Pimco’s Bill Gross:

Tramp stamp and hooker heels do not begin to describe the sordid, nonsensical role...

Cayne TV

Tune in now via C-Span: Jimmy Cayne, former boss of former brokerage Bear Stearns, is due to appear in front of the Financial Crisis Inquiry Commission in Washington later on Wednesday....