Investors cool on private equity amid debt worries

Sun Dec 11, 2011 7:11pm EST
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By Yeganeh Torbati

LONDON (Reuters) - Bone-dry credit markets and Europe's sovereign debt crisis are weighing on private equity firms' ability to make deals, leading some investors to rein in their allocations to such firms across the region, a survey has found.

One in five investors said they planned to reduce their exposure to European private equity because of the continent's debt crisis, according to the survey conducted by private equity firm Coller Capital.

A further 69 percent said they would maintain their current levels of exposure to Europe, while 11 percent said they would increase their investments.

European buyouts have all but ground to a halt in the second half of the year, with many auction processes pulled or postponed until credit conditions improve.

"People are looking at the euro zone at the moment and thinking, 'We don't know which way things are going to go'," said Jeremy Coller, chief investment officer at Coller Capital.

"We're not quite in a credit crunch now, but people are apprehensive that there might be one. The debt markets are selective and fragile, so it's difficult for private equity to structure deals."

Concerns about the buyout industry's ability to access financing for new deals are intensified by a looming wall of debt maturities over the next two to five years, which will be tough and expensive to refinance.

Private equity groups have $365 billion of loans due by the end of 2016, according to Thomson Reuters LPC/DealScan data.   Continued...