Monday's Wall Street Journal raised a pressing question: Can lenders keep up with the buyout boom?
Interestingly, similar questions were asked Monday at The Deal's Private Capital Symposium, and received mixed answers. Karim Assef, head of financial sponsors at Bank of America Corp., was the first panelist to address the boom question, and he admitted it "has defied expectations." Most panelists agreed that the hedge fund industry has helped sustain the PE boom by offering PE firms an additional source of debt.
When asked how much longer the boom has, the only speaker at "The Outlook for Private Capital" panel to put a date on when a downturn might occur was Dan Glickman, managing director of GE Antares Capital, who expects it to come later next year because, as he explained, the buyout market is beginning to resemble the marketplace that preceded the 1991 PE downturn.
The Journal article suggests Glickman may not be off the mark because the debt markets may run out of capital later this year, suggesting PE firms likely will need $600 billion in debt, which would be double what the market could bear. Although hedge funds remain cash rich, even they will run dry, according to the Journal. And when the new source is gone, the downturn will be bigger than anything before it, Glickman said. However, he also admitted he's been wrong before. —Matthew Wurtzel
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