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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7616)	3/2/2007 6:57:16 PM
From: John Pitera	Respond to of 33421

Nordwind warns of private equity slump in 2009 Friday, March 02, 2007 5:20:00 AM (GMT-06:00) Provided by: Reuters News By Hans Nagl FRANKFURT, March 2 (Reuters) - In the face of ever riskier credit practices, the private equity industry is moving towards a slump, one of Nordwind Capital's managing directors warned in an interview with Reuters. "I believe the sector will carry on full steam ahead at first," Hans Albrecht said in Frankfurt. "But there will be a correction, I'm guessing in 2009," he added. "There could be even bigger problems for the hedge funds industry, and I do not believe it will be the often-quoted 'soft landing'." The risk of major problems for the capital market was small but existed, Albrecht said, adding that he would not rule out a large financial crisis. In 2006, private equity firms set a new record by realising takeovers worth more than $660 billion. Only this week Texas Power company TXU <TXU.N> agreed to a sale to Kohlberg Kravis Roberts [KKR.UL] and Texas Pacific Group [TPG.UL] in the largest leveraged buyout in history, valued at almost $44 billion, including debt. During the last two years, the funds have steadily raised the leverage levels and with that the debt burden the companies have to shoulder. Recently, experts like the European Central Bank (ECB) and the German Bundesbank criticised this. They fear that in the face of the rising credit appetite of hedge funds, financial markets will get more and more leveraged, creating the risk of higher volatility. "All the excesses in private equity are only occurring at the moment because the banks are able to sell their exorbitant credits without any problem," the Nordwind co-founder said, adding that hedge funds were already waiting in the wings to buy them. But hedge funds had no incentives to make long-term investments, Albrecht said, urging investors to put pressure on hedge fund managers to invest more long term. Nordwind Capital has own funds of some 300 million euros ($394.9 million) and specialises in restructuring companies. Albrecht also urged the industry to be more open about the risks involved in the business, instead of trying to hide them behind a smokescreen.