The Blight Of Private Equity
Proof, if further proof were need, of the evil effects which private equity ownership has on companies which get bought by private equity funds comes from as couple of US studies into private equity-owned companies.
According to the US-based Private Equity Council, 25 per cent of the S&P rated companies which defaulted on their debts in 2008 were owned by private equity funds.
According to The Boston Consulting Group, which examined over 300 companies owned by private equity companies, over half may default on their debts by 2011.
Hopefully this will encourage more investors to pull their money out of private equity funds which have been a blight on productive industry, with KKR saddling NXP with $6 million of debt which costs it $480m a year to service, and Blackstone saddling Freescale with $8 billion of debt that costs it $700m a year to service.
Furthermore, both NXP and Freescale have to start repaying the debt capital in the next two years, which could leave them with even more interest to pay under a re-negotiated debt structure which could impose higher rates of interest.