Private Equity
As anyone trying to get a mortgage these days knows, leverage isn’t what it used to be. The Great Deleveraging, begun in late 2007 as the credit crunch took hold, affected the entire corporate and consumer financial services community. Debt became a four-letter word, thanks to the unmasking of sub-prime mortgages as the true villain of the era. Those no-income-no-equity loans took leverage to its theoretical extreme, coming to represent all that’s bad about structured credit and securitization. The carnage it brought to Main and Wall also made it impossible to appreciate all the benefits – liquidity, low cost, diversification of risk – of those off-balance sheet financings.
3 min read · 25 October 2010
“My, what big teeth you have, grandma!” exclaims Little Red Riding Hood in the beloved, eponymous fairy tale. “All the better to eat you, my dear!” declares the Big Bad Wolf, before devouring Little Red Hiding Hood and running off into the woods. Over the last few months, investment bankers have been eagerly reaching out to corporate buyers at the large public technology companies, as their burgeoning balance sheets have grown large enough to cause even a sangfroid, buttoned-down banker to salivate. For example, the eight US-based technology companies with market capitalizations of over $100 billion (Apple, Microsoft, Google, IBM, Oracle, Cisco, Intel and HP) are sitting on over $200 billion in cash and short-term investments. Throw in the top three healthcare firms by market capitalization (J&J, Pfizer and Amgen) and the figure is $250 billion. Further, each of these companies is in a strong competitive position, competing in markets with positive secular trends thanks to the burst of innovation that is ahead of us. I can’t cite another time in the brief 50 years history of the technology industry when so many US-based companies were in such strong global leadership positions in so many compelling, growing markets.
2 min read · 20 October 2010
Are middle market senior lenders really back? Newspapers and industry publications say they are. You hear of certain private equity funds that claim they’ve been accessing senior debt. You may even get calls from some lending officers offering their wares. Yet for all the hoopla that senior lending has returned, we believe that senior debt for middle market companies (defined as those with EBITDA less than $50.0 million) is still limited and only available to the best credits. Yes, there is an ample supply of asset based senior debt. Obtaining senior debt based upon collateral values is now easier than it has been in several years and some asset based lenders are even starting to offer overadvances, something unheard of even six months ago.
3 min read · 19 October 2010
3 min read · 18 October 2010
3 min read · 13 October 2010
3 min read · 11 October 2010
Last week’s column got more reaction than any since our On The Left newsletter began publication two and half years ago. Who knew everyone has a meatloaf story? The best was from a friend of the firm who told us he couldn't believe any mother would foist a faux loaf on her children. "My mother would never have done that!" He was so upset that he called his own mother in Miami to relate his outrage. "You're right, dear," she told him, "my meatloaf was always the real thing." Brief pause. "But you never asked about my tuna casserole."
3 min read · 11 October 2010
4 min read · 06 October 2010
4 min read · 05 October 2010
4 min read · 30 September 2010
