Geo-politics and the credit market

The current turmoil in credit markets could end up strengthening the hands of China and the oil-rich nations. Henny Sender, writing in the Wall Street Journal ($link), raises this possibility:Debt isn't merely more expensive, it is scarcely available at any price or on any terms, jeopardizing the 'L' in leveraged buyouts. Private-equity firms are looking for new pools of capital to take the place of the banks and hedge funds now sitting on the sidelines that provided deal financing.One possible source: the bulging coffers of oil-exporting nations and other rich governments. Their sovereign wealth funds are big investors in private-equity funds. They also have been investing alongside the firms, helping buyout shops do their largest deals in a practice known as co-investment. The Qatar Investment Authority routinely asks for co-investment opportunities when it invests in funds. Private-equity firms now wonder if they might tap these same pools of capital for the debt instruments they...(Read Full Post)

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