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| "Even when the market was functioning we could see that these were very poor quality assets – a deal that is a pig at par is still a pig at 96" |
NOBODY WAS GOING to win any prizes for guessing that the cheap money fuelling the leveraged buyout boom of the past few years would not last for ever. Even as the stream of ever more audacious deals continued to hit the market in the first half of this year (and long before) many firms – indeed often the same firms that were sponsoring these buyouts – were working on how best to exploit the inevitability that some of these deals would not survive. So the market is now seeing such firms as Kohlberg Kravis Roberts planning to buy up loans at a discount from investment banks that have been unable to sell on the deals they underwrote for the likes of ... err ... KKR. When these firms describe themselves as multi-strategy, they clearly aren’t joking. But the private equity sponsors are not the only ones that have been thinking ahead.
