In July 2007, turmoil that had been affecting the mortgage markets, spilled over into the leveraged finance and high-yield debt markets.[86][87] The markets had been highly robust during the first six months of 2007, with highly issuer friendly developments including PIK and PIK Toggle (interest is "Payable In Kind") and covenant light debt widely available to finance large leveraged buyouts. July and August saw a notable slowdown in issuance levels in the high yield and leveraged loan markets with only few issuers accessing the market. Uncertain market conditions led to a significant widening of yield spreads, which coupled with the typical summer slowdown led to many companies and investment banks to put their plans to issue debt on hold until the autumn. However, the expected rebound in the market after Labor Day 2007 did not materialize and the lack of market confidence prevented deals from pricing. By the end of September, the full extent of the credit situation became obvious as major lenders including Citigroup and UBS AG announced major writedowns due to credit losses. The leveraged finance markets came to a near standstill.[88] As a result of the sudden change in the market, buyers would begin to withdraw from or renegotiate the deals completed at the top of the market: Harman International, 2007 (announced and withdrawn) Kohlberg Kravis Roberts and Goldman Sachs Capital Partners announced the $8 billion takeover of Harman, the maker of JBL speakers and Harman Kardon, in April 2008. In a novel part of the deal, the buyers offered Harman shareholders a chance to retain up to a 27% stake in the newly private company and share in any profit made if the company is later sold or taken public as a concession to shareholders. However, in September 2007 the buyers withdrew from the deal, saying that the company's financial health had suffered from a material adverse change.[89][90] Sallie Mae, (announced 2007 but withdrawn 2008) SLM Corporation (NYSE: SLM), commonly known as Sallie Mae, announced plans to be acquired by a consortium of private equity firms and large investment banks including JC Flowers, Friedman Fleischer & Lowe, Bank of America and JPMorgan Chase[91][92] With the onset of the credit crunch in July 2007, the buyout of Sallie Mae encountered difficulty.[93] Clear Channel Communications, 2007 After pursuing the company for over six months Bain Capital and Thomas H. Lee Partners finally won the support of shareholders to complete a $26.7 billion[37] (including assumed debt) buyout of the radio station operator. The buyout had the support of the founding Mays family but the buyers were required initially to push for a proxy vote before raising their offer several times.[94] As a result of the credit crunch, the banks sought to pull their commitments to finance the acquisition of Clear Channel. The buyers filed suit against the bank group (including Citigroup, Morgan Stanley, Deutsche Bank, Credit Suisse, the Royal Bank of Scotland and Wachovia) to force them to fund the transaction. Ultimately, the buyers and the banks were able to renegotiate the transaction, reducing the purchase price paid to the shareholders and increasing the interest rate on the loans.[95] BCE, 2007 The Ontario Teachers' Pension Plan, Providence Equity Partners and Madison Dearborn announced a C$51.7 billion (including debt) buyout of BCE in July 2007, which would constitute the largest leveraged buyout in history, exceeding the record set previously by the buyout of TXU.[96][97] Since its announcement, the buyout has faced a number of challenges including issues with lenders[98] and courts[99] in Canada. Additionally, the credit crunch has prompted buyout firms to pursue a new group of transactions in order to deploy their massive investment funds. These transactions have included Private Investment in Public Equity (or PIPE) transactions as well as purchases of debt in existing leveraged buyout transactions. Some of the most notable of these transactions completed in the depths of the credit crunch include: Citigroup Loan Portfolio, 2008 As the credit crunch reached its peak in the first quarter of 2008, Apollo Global Management, TPG Capital and the Blackstone Group completed the acquisition of $12.5 billion of bank loans from Citigroup. The portfolio was composed primarily of senior secured leveraged loans that had been made to finance leveraged buyout transactions at the peak of the market. Citigroup had been unable to syndicate the loans before the onset of the credit crunch. The loans were believed to have been sold in the "mid-80 cents on the dollar" relative to face value.[100] Washington Mutual, 2008 An investment group led by TPG Capital invested $7 billion—of which TPG committed $1.5 billion—in new capital in the struggling savings and loan to shore up the company's finances. http://en.wikipedia.org/wiki/Private_equity_in_the_21st_century

• published: 22 Aug 2013
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