Sure, Buyout Shops Present Systemic Risks To The Economy
At least, you can make the argument, according to the U.S. Securities and Exchange Commission. Take the practice by buyout shops of securing bridge financing from banks on new deals as a temporary measure until permanent financing can be put in place. “When market conditions suddenly turn, these can be left holding this potentially risky bridge financing (or committed to provide the final bank financing, but no longer able to syndicate or securitize it and thus forced to hold it) at precisely the time when credit market conditions…have worsened,” the SEC writes in a proposal published late last month to require registered buyout shops and hedge funds to regularly fill out so-called Form PFs. The forms would be used by the newly-created Financial Stability Oversight Council to monitor risks to the U.S. financial markets.
