It's official. Private equity is back, or so said
The UK magazine, a champion of free-market economics, gave a mixed report to the private equity firms that are stepping in to offer a remedy for the credit crunch.
Two transactions in particular caught the author's eye. TPG Capital, the US buyout group, led a $7 billion (€4.4 billion) injection of capital into Washington Mutual (WaMu), a US savings and loan bank that is the country's sixth-biggest bank and mired in subprime mortgages. TPG is also one of three firms alongside Apollo Management and The Blackstone Group that are reportedly negotiating with Citi to snap up $12 billion-worth (€7.5 billion) of leveraged loans that have been stuck on the bank's balance sheet since the credit markets froze.
Of WaMu's rescue, it thought TPG was underplaying its hand. “Regulators are jumpy about who runs banks: TPG has reportedly promised WaMu's supervisor that it will not use its holding to exercise control. That rather defeats the point.”
Goldman Sachs, which advised on the WaMu recapitalisation and counts the bank as a client, was confident the stock had further to fall. Roddy Boyd noted over at
“Someone has to act as a vulture. The issue always boils down to “at what price is this worth the risk?”
Of course to the opponents of private equity, these deals are a gift. The IUF, an international union association and staunch critic of buyouts, noted (http://tiny.cc/€0aau): “Picking up heavily discounted buyout debt could bring massive rewards to funds who lost out in bidding wars which drove purchase prices to ludicrous earnings multiples – and leave them in possession of the company in the event of a default. All the classic conflict of interest issues raised by the buyout process are magnified and intensified here.”
But perhaps the last word, for now at any rate, has to go to Melonie, a moderator on a niche online forum for exotic dancers (http://tiny.cc/4y8TC). Commenting on
On that, Melonie and