Eric Capp, global head of leveraged capital markets for Royal Bank of Scotland, said today the British government has not put a cap on lending for private equity.
Speaking at the European Private Equity Forum in London today, Capp said: “I don’t think the government is saying stop lending to [private equity firms]. I think it would be counter-productive to say this, as it is difficult to make a distinction between private equity and publically backed businesses when lending,” he said.
The future of bank lending to private equity is uncertain as a result of the financial crisis. The UK government now has a majority stake in RBS following a recapitalisation plan in October, when it injected £20 billion pounds into several British banks to stave off their collapse. Following the government’s rescue of British banks, there is common perception that under the current market conditions nationally managed banks and private equity will not be natural bed-fellows.
Despite its influence as an RBS stakeholder, Capp said the UK government was not actively looking to intervene in lending. He also said the government’s recent encouragement for banks to lend to small businesses was “jargon” rather than policy.
Capp’s comments come at a time of growing pessimism in private equity circles about a potential reopening of the leveraged lending market in the foreseeable future. He said capital markets were still under extreme stress. Until this eases, the leveraged buyout market will remain subdued: “If we regain stability in the equity and debt market we will start to see more deals”.
On Tuesday, Mervyn King, the governor of the Bank of England, said that a further injection into British banks of government money may be required to stimulate lending as a means to minimising the impact of the recession.