On initial public offerings –
It is springtime for IPOs. . . . KKR and Bain, two of the most aggressive private-equity firms during the buyout boom, are now as aggressively looking to cash out. They are leading what is expected to be a season of IPOs as long as the markets continue to stabilize or climb.
The IPOs would allow the firms to partially cash out their stakes and return money to investors. They also could use the proceeds to pay down the sizable debt used to finance the takeovers. ("Bain, KKR to Push New Crop of IPOs," The Wall Street Journal, April 9)
On leveraged loans –
Even as worries escalate about the ability of highly rated countries to fund themselves, there is a buzz at the other end of the credit spectrum. Leveraged loans, a source of funding for private-equity acquisitions, are drawing investor interest again after a long period in the doldrums.
In the U.S., there are signs of life in the collateralized-loan-obligation market, with the year's first deal not only refinancing an existing CLO but bringing in new money, too. In Europe, HarbourVest Partners is launching a listed fund to invest in mid-market leveraged loans. Leveraged-finance bankers are more bullish, and new loans have started to flow. . . .
There are wider implications, too: Cash moving into the loan market
represents a greater willingness to hold more illiquid assets, an important development. . . . ("A Pulse Finally Returns to the Leveraged- Loan Market," The Wall Street Journal, April 12)
On dividend recaps –
Blackstone Group LP and other private-equity firms are accelerating sales of junk bonds and leveraged loans to pay themselves dividends in a sign the market for the riskiest debt may be overheating.
Apria Healthcare Group Inc., owned by Blackstone, is seeking consent from bondholders to sell notes to issue a dividend, following at least six similar offerings this year, according to data compiled by Bloomberg. Including loans, companies have raised $10.8 billion in debt to fund payouts this year, compared with $1 billion in all of 2009 and $1.3 billion in the prior 12 months, according to Standard & Poor's LCD.
Private-equity firms are taking advantage of record high-yield, high-risk bond sales and a rally in loans to extract cash from companies they own, awaiting a rebound in leveraged buyouts and initial public offerings. So- called dividend deals, which permeated debt markets in 2006 and 2007 before the credit seizure, may signal investors are becoming too complacent, said William Quinn, chairman of American Beacon Advisors Inc.
"You start to be concerned that you're increasing leverage, which was one of the things that created these problems in 2008," said Quinn, who helps oversee $45 billion for the fund manager in Fort Worth, Texas. "I understand why private-equity firms do it, but I would be concerned." ("Dividend Deals Rebound as Blackstone Seeks Cash," Bloomberg, April 16)
