"Money drying up for some investors in buyout firms"

this will be interesting and very importend topic to watch. there is no doubt that the main action in the stockmarket was fueled by private equity takeover/buyout/going private rumors. one thing that is even at least equally importend than the money to fund this private equity funds are the creditconditions/spreads to leverage the investment. the spreads are now close or at recordlows"across the full ratingspectrum (aaa to junk), the only exception in the last month is the bbb us mbs market. (no wonder.....)



das ist der springende punkt für die aktienmärkte in den nächsten monaten. diese spieler haben den markt in letzter zeit entscheidend geprägt. mindestens genauso wichtig wie die gelder sind allerdings die kreditkonditionen/risikoaufschläge um das investment zu hebeln. diese liegen mit ausnahme der us mbs nahe der rekordtiefs.

thanks to http://www.itulip.com/

that is happening at the same time when US credit quality in 25-year retreat toward junk-S&P. amazing!

das ganze passiert zeitgleich mit ner rapiden verschlechterung der kreditratings in den usa. erstaunlich!

this point is so importend because the pe firms didn´t really have to make an exit to get gigantic return. they just load the company up with tonns of debt to get an "extra dividend"
The debt of companies owned by buyout firms has risen to the equivalent to 5.4 times their cash flow (some deals in the last time have had even higher multiples!einer der letzten deals hatten noch höhere multiples), the most ever, S&P says. here are some examples like hertz etc
(time to call the stuntmen.../ zeit den stuntmen zu rufen)


Since buying Hertz, the Clayton Dubilier ownership group has raised debt by $3.4 billion and shaved cash and cash equivalents almost in half.
In a leveraged buyout, the acquirer borrows most of the purchase price and uses the target company's cash flow to repay lenders
The owners have received a dividend of $1 billion and plan to get another payout of about $420 million (and still they have managed to take this company public)

(Reuters) - The massive funds raised by private equity firms and the faster-than-expected speed with which they're spending them are stretching some of their investors thin, causing concern that there won't be enough money to go around in 2007.

The crunch on institutional investors is being fueled by a 32 percent drop in the number of sales by private equity firms, known as exits, in the last two years, while the number of buyouts has skyrocketed.


What is worrying institutional investors is that funds are coming back to them too quickly for money, without a track record from their prior fund.

A drying up of institutional capital would be a major setback to private equity firms raising funds next year and would likely prompt a slowdown in the torrid pace of deals sparked by the sector in the last two years.

Feeding such concerns are reports that firms such as Bain Capital, which raised $10 billion last year, may return to the fund-raising trail next year. The Carlyle Group and Warburg Pincus LLC are also expected to raise $10 billion-plus funds next year -- a relatively short turnaround time from their prior funds. (some argue this kind of fundraising is also in part to make a fortune in fees / einige kritiker behaupten das es pe auch um das abschöpfen der verwaltungsprämien geht. Now that the largest firms have as much as $30 billion in assets, their 1% to 2% management fees alone guarantee hundreds of millions of dollars annually)

Signs that The Blackstone Group is having a hard time raising the last chunk of the industry's largest-ever buyout fund, according to sources, are also helping to stoke fund-raising worries. Blackstone closed a $15.6 billion fund earlier this year, and reportedly is seeking to reopen and lift it to $20 billion. (no wonder when you look like the last "desperate" deals like this. kein wunder wenn man sich die letzten verzweifelten deals ansieht....)

There are some big funds coming out amazingly fast across the board. If you come back to market with few to no exits, that always creates difficulty for the investor. They're being asked to double down here," ......

The value of private equity-backed buyouts this year doubled to $602.4 billion from last year, according to Dealogic, on 1,912 deals.

At the same time, the value of their exits is down 23 percent to $176.8 billion. The number of exits, which include selling to other buyers or public offerings, is down 24 percent to 698, (it would be importend to know if number includes sales to another private equity frim/wäre wichtig zu wissen ob diese zahl verkäufe an andere pe firmen miteinschließt.)

"Exits are way down. That raises issues on what LPs have in cash. LPs keep plowing money out but there's nothing coming in. You've seen them do big deals, but you haven't seen the exits,"

So-called buyout firms used to take four to five years to spend their funds, allowing investors to receive returns gained from the sale of assets over that time. These institutional investors, known as limited partners (LPs), had money going out and money coming in. Right now, the money is mainly going out.

Indeed, so many big funds are spending money so fast that its sucking demand from investors. If private equity firms keep buying into companies at a pace that far exceeds their exits, the LP spigot could go from a steady stream to a slow trickle.

RUNNING DRY
....., an LP pullback in the next fund cycle would almost certainly spark a slowdown.

The Oregon State Treasury, ........, tapped out of its 2006 allocation money in September.

"That's the first time that's ever occurred for us," said Jay Fewel, senior equities investment officer at the Oregon State Treasury. He added that he was aware of other institutional investors that used up allocation money as early as May.

And no wonder. Last year, U.S. buyout funds raised around $150 billion, a 50 percent increase from the prior year, according to Thomson Financial, and roughly $50 billion was raised by overseas funds. This year, funds expect to raise $300 billion, according to private equity experts.

LPs are spending more on buyout funds because their returns are so impressive, especially from the largest funds. In the 12 months through June 2006, investments in private equity firms returned 22.5 percent vs. 6.6 percent for the S&P 500,

Buyout firms' success has been fueled in part by smart deals, favorable debt markets and an absence of corporate buyers. Private equity firms accounted for 22 percent of global M&A volume in the first nine months of the year, hitting a record $570.1 billion in deals. That's up from around 5 percent a few years ago.......


"There are a lot of fears in the back of LPs' minds that private equity firms are writing checks like crazy," said Kelly DePonte of Probitas Partners, a private equity fund-raising firm. "With another fund raising wave incoming in '07, a lot of LPs are beginning to feel tapped out. They're thinking this may be a great time to sell companies, not a great time to buy."

when this source of funding is really drying up maybe some central banks can fill the gap.... :-), the step from buying fannie mae paper isn´t that big anymore ...........

evtl. können dann ja die zentralbanken diese lücke füllen..... :-), so groß ist der schritt vn fannie mae papieren nicht mehr........