Fall is here, stagflation is in the air, and Bloomberg terminals are aflutter with news of a great “reckoning” for private equity, triggered by Federal Reserve rate hikes.
“I don’t think the spigot reopens,” David Sambur, co-head of private equity at Apollo (a favorite subject of the Prospect’s private equity reporting) told Bloomberg TV’s Sonali Basak at a closed investment conference on September 14, adding that he felt Wall Street remained “early in the hangover” caused by Fed chair Jerome Powell’s shocks.
Sambur referenced a signature example of what he called the “reckoning”: the embarrassing scramble of banks to find buyers for bonds associated with the $16.5 billion leveraged buyout (LBO) of the enterprise software firm Citrix Systems. Banks loaned “affiliates” of Vista Equity Partners and Elliott Management $15.5 billion to close the deal back in January, but interest rates have risen an unheard-of three percentage points since then, and even with generous assistance from Sambur’s employer, banks have been forced to raise the yield on Citrix bonds commensurately to convince anyone to buy them.
“Everyone was getting comfortable in August again but unfortunately Jackson Hole happened and then everything went haywire,” a banker close to the Citrix deal told the Financial Times, referring to Federal Reserve chairman Jerome Powell’s indications in a speech at the annual Jackson Hole Economic Policy Symposium that rate hikes…
