There was a great article yesterday by Bloomberg’s Jason Kelly and Pierre Paulden titled, “Blackstone Risks Hedge Funds’ Return as LBO Lending Evaporates.”
I have no edge on this deal in particular (or I wouldn’t be able to write about it!), but it appears that The Weather Channel LBO that we wrote about in a prior posting isn’t the lock that the buying consortium originally thought it to be. We’re not talking about a club deal with marginal players here either – General Electric, Bain Capital, and Blackstone.
Suffice to say, my long held view that Access to Capital Tightening as Cost of Capital increases continues to have far reaching effects. While some believe that this is a short term funding issue, and others brush it off as a “confidence thing”, I think this is structural and will have longer term effects than many would like to accept.
Per the article, the facts continue to play on our side of the thesis. “The $153.9 billion of announced buyouts this year is down more than 70 percent from the same point in 2007, according to data compiled by Bloomberg.”
What a difference a year has made to those depending on levered long investment models.