The Deal's Fifth Annual Private Capital Symposium wrapped up with the keynote interview of Hamilton "Tony" James, the president and COO of the Blackstone Group LP, in a discussion of the benefit of loose debt covenants.
Continue reading below
"During times ... of defaults, we've been a big player in distressed investing," said James. "It's been a very lucrative area for us, but this has been a credit slowdown with no defaults. There's been a little bit of a pick-up, but it's still near historical lows. Unless the economy gets significantly slower, there may not be a lot of defaults."
James attributes the lack of defaults in the face of a slowing economy to the covenant-lite debt terms portfolio companies received in the boom times.
"Coventant-lite debt structures are not only private equity's interest, they're in everyone's interest," James said. "The only one you might argue is not better off is the senior secured. By keeping the company intact, the private equity owners are able to fix the problems, and by preserving the employees, the customers and the business society at large benefits."
"I think everyone here should go out and tell everyone they know that PIK toggles and convenant-lite debt structures are good for society at large," he joked. - George White
See Private Capital Symposium agenda
See more posts from the Private Capital Symposium
