Private Equity Funds and Hedge Funds Leveraged buyouts put world market at risk IMF warned that the pace of leveraged buyouts can cause risk of destabilization of world financial markets.
IMF expressed in its latest Global Financial stability report that PE Private Equity funds engineered the (LBOs) Leveraged Buyouts by financing companies, takeovers through borrowed money.A giant US Private Equity consortium KKR-Kohlberg Kravis Roberts (They are not the part of any cartel or pool to our information. It is only the free speech of the Democratic World to express views without prejudice to our rights.) Initiated and mastered this art of the structured financial technique of LBOs few decades ago like the Morgans, Rockefellers, Warburg Pincus and few others with the support of a Senator.Mastered the art of Banking by Creating the World’s first and biggest Cartel ever known as FED which is controlled by the the private sector Banking Giants with the full support of the White House to corner the entire World’s wealth in just about ten persons hands .
This all happened at the Jekyll Island a real Island.Now don’t start looking for this Island as it has already happened and is History and continuing and the world have to acknowledge it.At the same time it helps the world in many ways by developmental finance and charities to Humanitarian Projects in the third World besides helping the Governments to fund their wars like they help the corporates for their Global acquisitions with the LBO support.The writer of this article salutes the great vision of these Giant Financial Scientists of the times when the World was learning the ABC of Banking. The Private Equity Cartels are again owned and by and large the offshoots of these Banking GODS.
The equity groups usually withdraw the acquired company from the Stock Exchanges Listings and spin off the most lucrative parts. (This is not an approach by all the PE equity Funds Investors. There are exceptions to the rule and these PE Funds help add value to the share holder’s money by supporting the acquired company financially, bringing about technical and strategic alliances with their global resources.) This delisting from stock exchanges of the acquired company is done to avoid the probing eyes of the Regulators to bring Bags loads of cash into private funds, the IMF said.
The report of the International Monetary Fund further expressed that the LBO acquired companies have a risk of becoming debt trapped and can be more vulnerable to World Markets Economic Shocks. The liquidation of couple of high profile deals can lead banks with exposures during the syndication stages and cause chain reaction for much wider risks reappraisal of a large number of Credit Products. LBOs recorded a high level in 2006 in the U. S with more than fifty percent deals happening there. It is to be noted here that LBO?s emerged as a structured financial strategic engineering in 1980?s. KKR was one of the pioneers to lead the world into this strategic game of LBOs for consolidation, monopoly, castelisation, rapid gains for the funders with the finest intention of helping their global clients with their global resources etc. LBO’s World value in 2006 crossed nearly $ 600 Billion marking a 70% rise over 2005 values.
KKR and Texas Pacific groups of U.S in the month of February, backed by Goldman Sachs and other Wall Street Banks bid a record amount of $ 45 Billion for TXU TEXAS Energy Group. The bid of $45 Billion broke the earlier record of Blackstone group’s takeover of the U.S group equity office properties trust. This deal has a debt component of $ 16 billion. IMF’s Monetary and Capital Markets Director Jaime Caruana is concerned about the regulators relaxing rules and standards thus causing LBO boom in the Western Worlds Financial Markets. (Banks in countries like India do not indulge in LBO’s due to lack of risk taking initiatives, Central Bank RBI, and Stock Exchange Boards Regulator being stiffer in standards) .
Cauana further expressed that the targeted company in such a deal, once debt trapped heavily can reach a situation extremely difficult to handle with the fast changing World Economic Scenario. As per IMF, G 7 Finance Ministers on Saturday are expected to debate in Washington at their Annual Spring meeting on the secretative industry of Hedge Funds also. Germany wants tougher regulations and controls on the Trillion Dollar Hedge Fund Industry which is connected deep rootedly with the LBOs as their agenda is necessarily High Yield on their investments in multifields. The Investments are contributed by a very close knit HNIs, group of real standing in their spheres with full knowledge of their Portfolios handled by the Fund Managers. It is very concerning in the light of the Pension Funds (who are very conservative by the nature of their incorporation and the goal of Investments.) now joining the bandwagon of Investors in the Hedge Funds who are absolutely opposite to PF’s in their nature. The secretive practices of trading aimed at high yields by HFs for their HNI and other Investors is relatively for shorter span of times with speculative risks linked to it. This is not for what the Pension Funds are created for.
The HFs indulges in all kinds of trades and instruments where ever they can lay their hands for quick gains by hedging their stakes in different fashions in different Portfolios. The G 7 who almost control and monitor the World Economics will have to regulate the Hedge Funds and the Private Equity funds engaged in backing the LBO’s world over with their cartelized financial muscle. However there is another school of thought that PEs and HFs must continue as they jack up the economic activity and at times help the already failing companies by bringing in healthier companies to acquire them with their LBO’s supported technique without putting the healthy companies assets and shareholders stakes at risk. Such a M&A is a blessing in disguise for the ailing company and a boon for the healthy company for adding immediate capacity expansion and carve niche and larger shares of the markets while also enhancing its brand equity.
