By Josh Kosman
ISBN-10: 1591842859
ISBN-13: 9781591842859
An authoritative expos? of the mysterious and very likely harmful global of non-public fairness Few humans discover that the head deepest fairness companies, similar to Blackstone crew, Carlyle staff, and Kohlberg Kravis Roberts, became the nation's biggest employers throughout the companies they personal. utilizing leveraged buyouts that load their got businesses with loans, inner most fairness corporations have generated greater than $1 trillion in new debt-which will come due simply whilst those companies are least prone to have the ability to pay it off. Journalist Josh Kosman explores inner most equity's explosive development and indicates how its barons wring earnings on the rate of the long term wellbeing and fitness in their businesses. He argues that over the top debt and mismanagement will most likely set off one other monetary meltdown in the subsequent 5 years, wiping out as much as million jobs. He additionally explores the hyperlinks among the personal fairness elite and Washington strength avid gamers, who've helped them break out govt scrutiny. the result's a well timed ebook with a huge caution for us all.
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Extra info for The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis
Sample text
Fortunately too, interest rates came way down from where they were in the 1980s, so PE firms could refinance some of their struggling businesses, lowering debt payments and allowing companies to survive awhile longer. At about the same time that LBO groups became private-equity firms, junk bonds were renamed high-yield bonds, and investment banks like Donaldson, Lufkin & Jenrette, full of former Drexelites, began to sell them increasingly to mutual funds, money managers, and insurers. The funding spigot was on again.
Observers looked at the sale and scratched their heads, wondering how the numbers could possibly work out. Because the LBO firm had put down roughly 16 percent of the purchase price, Ohio Mattress now had to meet debt payments equal to twenty-eight-times annual earnings when factoring in interest payments and do so over ten years without any real plan for growth. But in the booming 1989 buyout market, the purchaser could hope that Ohio Mattress’s value would rise or at least stay the same, and if push came to shove, it could always refinance the debt and get a longer payoff period.
S. government sees PE firms as part of the bank-rescue solution. It wants PE firms to partner alongside its $700 billion Troubled Asset Relief Program (TARP) bailout fund in buying troubled banks at relatively low prices. All of this activity continues despite the likely collapse of half of the 3,188 American companies that PE firms bought from 2000 to 2008. If the credit markets remain restricted, the fall will be more dramatic. Many overburdened PE-owned companies will go under when their balloon debt payments come due, which in most cases will not happen until 2012 unless they break loan covenants first.
The Buyout of America: How Private Equity Will Cause the Next Great Credit Crisis by Josh Kosman
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