The frenetic activity surrounding the limited number of leveraged buyout (LBO) targets towards the end of 2009 and early 2010 has seen comparisons drawn to the pre-crunch years of 2006 and early 2007. While such comparisons are undoubtedly far too premature, it is clear that private equity investors and lending institutions are keen to start the year with a bang and put their money to work.
Despite the proliferation of financing ‘trees’ as certain financial institutions run multiple teams competing to offer loan, bond and/or hybrid structures to different bidders for strong LBO targets, there remains a continuing reluctance on the part of many traditional bank lenders to underwrite entire debt capital structures, including mezzanine debt. This has seen the emergence of non-bank investors who are willing to participate in transactions on a ‘take and hold’ basis, frequently in the subordinated debt classes but also across the capital structure.
