25% of leveraged buyout firms may default, says Moody's
At least 25 percent of unrated European leveraged buyout companies with debt due by 2015 may default as the economy worsens and private-equity owners refuse to inject capital, according to Moody’s Investors Service.
An analysis of European LBO companies found that 254 had a combined €133 billion of debt due by the end of 2015, with more than half owed by 36 borrowers, Moody’s said in a report.
“The 2014-2015 refinancing risk remains large and worrisome given our expectations of protracted macroeconomic weakness combined with the weak average credit quality of this universe,” analysts led by London-based Chetan Modi wrote in the report.
“We do not expect that private equity sponsors will inject further capital into their own distressed companies primarily to assist their lenders.”
Concern is escalating that Greece may exit the euro, splintering the 13-year-old currency bloc and threatening global growth, as European lenders pressure the nation to meet bailout terms ahead of elections next month. The euro is trading near the lowest against the dollar since July 2010 after dropping more than five percent in May, and the cost of insuring Spanish government and financial debt rose to record levels this month after Moody’s downgraded 16 of its banks.
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