Tuesday, June 26, 2007

Private Equity Investors Hint at Cool Down

Published: June 26, 2007, The New York Times

The buyout boom may be about to hit a bump.
After years of supersize private equity deals, investors in the debt that supports these transactions — the lifeblood of the industry — have begun to not so quietly push back at several prominent transactions.
Rising interest rates and tougher terms from investors may signal that private equity players will soon be struggling to continue reaping the outsize returns that have made the buyout business so lucrative.
Already a raft of bond offerings for recently announced deals, including the $7.75 billion buyout of Thomson Learning and the $7.1 billion deal for U.S. Foodservice, have been scaled back after facing resistance from investors.
This week, two other buyouts, the $4.7 billion deal for ServiceMaster and the $6.9 billion sale of Dollar General, are expected to price their bonds, and they may serve as an important barometer for a series of even larger deals to sell bonds to investors this summer.
Stock in the Blackstone Group, the private equity firm that went public Friday, fell 7.5 percent yesterday, to $32.44, in another sign that investors may now be less optimistic about the buyout boom. Blackstone’s stock opened at $36.55 on Friday and closed that day at $35.06.

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