More than USD0.5 trillion of European leveraged buy-out loans are due to mature between now and 2016, according to a new report form global law firm Linklaters.
Within this headline figure the report identifies which countries and sectors are most acutely affected and will face the greatest pressures. From a country perspective these include UK (USD172bn), France (USD86bn) and Germany (USD83bn) which have the largest requirements.
The largest sectoral burden falls on the telecommunications sector where USD67bn of LBO loans must be refinanced over the five years to 2016. The next four largest sectors are retail (USD47bn), healthcare (USD40bn), chemicals (USD37bn) and construction/building (USD36bn). Given the economic impact of seismic market changes and increased government intervention, the report from Linklaters looks at what the options are for refinancing this wall of debt and what the key milestones will be for each sector and how specific regulation and country legislation will impact lending patterns to sectors e.g. prioritised lending to some over others as a result of government pressures.
Private Equity houses have significant financial resources at their disposal. They are estimated to be sitting on USD937bn of unspent capital, more than a fifth of which is “dry-powder” in funds that usually would have to invest the money within about two years,
The wall of refinancing is a key opportunity for Private Equity houses. Whilst banks have to grapple with Basel III regulation, Private Equity houses are unaffected and can become a financial source for those financial institutions seeking to reduce their balance sheets and get rid of non-core assets.
Ian Bagshaw, Private Equity Partner in Linklaters, London, says: “We are back to grassroots private equity activity. For the right sponsor with the right financial skillset and access to capital and experience, the wall of debt presents a once in a generation opportunity.”
