Under that headline, the Financial Times reported that private equity firms’ inability to carry through leveraged buyouts (LBOs) of corporations in many fields—especially software—is the source of more than $1 trillion in imminent potential default problems in “private credit.”
The analysis is attributed to a hedge fund, Davidson Kempner Capital Management, whose managing partner Tony Yuseloff is quoted: “You’re not looking at a problem five years from now, you’re looking at a problem that exists today.” A chart accompanying the article shows that leveraged buyouts whose targets have been acquired, but then held for more than seven years by the leveraged buyout firm, have risen from a total of less than $400 billion in assets six years ago, to about $1.1 trillion now. All LBOs expect to sell or “unload” the takeover target within 4-5 years at most.
