Amid all the financial confusion, one things seems clear enough: the days of the $10bn plus leveraged buyout are gone for now.
Even when the backlog of unsyndicated high-yield loans held by banks is cleared – which now looks like will happen fairly quickly – they are not going to be rushing back to the private equity funds to offer new multi-billion facilities.
The reason for that is not simply that they have been burned by the events of the past year. More concretely, they can no longer package up mezzanine and secured debt for buyouts and transform it into collateralised loan obligations (CLOs).
This was the unanimous conclusion of a panel on private equity this morning at the Milken Institute Global Conference, which included Leon Black of Apollo Advisers and Thomas Lee of the eponymous private equity group.