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Private equity and leveraged finance markets

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  • Bank for International Settlements
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    Abstract

    The credit market turmoil since mid-2007 has substantially affected the terms and conditions of funding in leveraged finance markets. Rising investor risk aversion, growing pressure on bank balance sheets and a loss of confidence in structured credit products have sharply reduced demand for leveraged loans. The materialisation of warehouse risks from failed leveraged loan syndications contributed to unwanted expansion of bank balance sheets and has affected credit supply. The knock-on effects from deteriorating conditions in leveraged loan markets have also affected private equity financing. Against the background of these developments, the working group report on private equity and leveraged finance markets under the chairmanship of Henk Brouwer of the Netherlands Bank addresses two broad questions. First, what have been the important trends during the period of rapid growth in the markets for leveraged finance, private equity and leveraged buyouts, and how has market growth affected incentives and corporate structures? Second, how have leveraged finance markets performed since mid-2007, which risks have surfaced, and what preliminary lessons can be drawn for financial stability?.

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    Bibliographic Info

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    This book is provided by Bank for International Settlements in its series CGFS Papers with number 30 and published in 2008.

    ISBN: 92-9131-768-3
    Handle: RePEc:bis:biscgf:30

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    1. Steven Kaplan & Antoinette Schoar, 2003. "Private Equity Performance: Returns, Persistence and Capital," NBER Working Papers 9807, National Bureau of Economic Research, Inc.
    2. Joachim Keller, 2008. "Agency problems in structured finance – a case study of European CLOs," Working Paper Document 137, National Bank of Belgium.
    3. Cao, Jerry & Lerner, Josh, 2009. "The performance of reverse leveraged buyouts," Journal of Financial Economics, Elsevier, vol. 91(2), pages 139-157, February.
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