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What is the current bleak business landscape and downward fall of the markets doing to business? It does seem that the bottom of the market is being reached as the Times of London reported that Blackstone and CVC have put in a joint proposal to acquire 29.9 per cent of Mitchells & Butlers, the UK pub group whose shares have slide down after a property deal went sour.
Leveraged buyouts have been put aside with the growth of the credit crunch as financing has ground to a halt while banks are forced to work through a backlog of committed but unsyndicated loans.
However, buyout groups are carrying billions of dollars of funds and need to put their money to work, despite the lack of debt funding. Apollo, TPG and Blackstone also signed on to buy $12B of discounted leveraged loans from Citigroup, or 24% of the bank's $43 billion backlog of unsyndicated loans. This has probably set the price for other banks to begin to reduce their backlog. As the Time of London reports, "It calls the bottom globally, although it's a terrible deal for Citi. By calling the bottom, they create the bottom and if it works they unblock the system and the market starts to recover.”Blackstone, KKR and Carlyle have recently all closed new distressed debt funds and in Europe both Permira and CVC Capital have small debt businesses that are also starting to invest in underperforming leveraged loans.
In the meantime, private equity funds, including Apollo, Oaktree, Och-Ziff and Silverpoint are also digging through the market for attractive deals.
Here is Canada, with the closing of Jefferson and other funds, there is concern about private equity deals. This type of financial partnership is not the same as banking. It is high risk money.