NY Times: The Buyout Blues
June 8, 2009 at 6:01 AM (PT)
The leveraged buyout club’s chummy days may be over, writes HARD BEALES and LAUREN SILVA LAUGHLIN in THE NEW YORK TIMES. "Not long ago, the government was investigating private equity firms for acting too clubby. As the brewing battle over CLEAR CHANNEL’s proposed $2.5 billion debt exchange suggests, however, it could soon be more like open warfare in the land of the barbarians.
"Some private-equity firms are trying to salvage overleveraged companies acquired during the boom by asking debt investors to exchange their existing holdings for other kinds of debt that may be less desirable. This is the case, for instance, with the radio company CLEAR CHANNEL COMMUNICATIONS. The plea from its owners, BAIN and THOMAS H. LEE, is facing resistance from creditors, according to The FINANCIAL TIMES.
"The wrinkle is that some of the creditors are rival private-equity firms, like APOLLO and BLACKSTONE’s debt hedge fund. Any rumble between private-equity firms would be an about-face from the type of relationship they had when all was rosy in buyout land.
"During the boom, club deals, where several private equity firms would get together to buy an asset, were the norm. The $11 billion buyout of SUNGARD in 2005, for example, had seven private equity buyers working together, including BAIN and BLACKSTONE. The Justice Department even looked into whether private equity firms were colluding, although that never turned into any charges.
"Situations like the CLEAR CHANNEL standoff look 180 degrees different. Now the private equity firms that are creditors -- some sniffed around CLEAR CHANNEL when it was for sale in 2006 -- may think they will do best by forcing the company into bankruptcy, potentially wiping out the current owners and enabling them to take it over."
Check out the full article here.