News

Auditors declare a private equity deal that will load 92% of the price tag in debt onto Canadian telecoms group BCE (owner of Bell Canada) would endanger the company. UNI Global Union has been advocating against such high levels of debt leverage for the past two years. The buyout consortium including Providence Equity Partners, Madison Dearborn and Ontario teachers’ pension fund will be unlikely to close the deal with the release of KPMG’s report to the company.

“BCE’s four successive quarters of poor sales have hit profits and hampered the companies ability to pay back the debt that is due to be placed in its books.” The Guardian , 27 November 2008

The days when private equity could buy at close to 100% debt are over. The inability of banks to issue the high level of debt, due to the poor credit markets will hamper future deals. However in the case of the BCE proposed buyout, two of the biggest victims of the credit crisis are backing the deal- Royal Bank of Scotland and Citigroup. It is this sort of irresponsible investment activity by private equity and some banks that UNI believes should be regulated.

Many analysts currently claim that private equity deals that have this sort of leverage are now in danger of defaulting on interest payments. UNI Global Unions wants private equity managers to reveal their plan for unstable portfolio companies. What will happen to the workers employed in these companies? UNI will be arranging delegations to major private equity firms to put these questions directly to senior portfolio managers.