News

UNI Global Union is warning affiliates, pension funds and regulators that private equity is the next bubble to burst. If you need more confirmation that private equity will be hit by the financial crisis, then the staff layoffs at 3i should be an indication. 100 staff at UK private equity firm 3i will be retrenched in the coming weeks. This is the second staff cut for 3i since March 2008.



“3i’s shares have suffered with the rest of the quoted private equity sector, falling 63% in a year and wiping more that £2bn off the group’s market value amid fears its portfolio will suffer from a recession across much of Europe.” (Martin Arnold, 2/12/08 FT.com)



UNI is appealing to regulators to include private equity in the re-regulation debate on the financial crisis. Private equity has loaded its portfolio companies with debt they are finding hard to pay off. Companies bought through leveraged buyouts will suffer the same as publicly listed entities; however the burden of debt they carry will make it a lot tougher on the balance sheet. Jobs will almost certainly be cut within portfolio companies as the pressure to repay debt increases. Private equity should never have been allowed to borrow at these unsustainable ‘debt to equity’ ratios of 70/30 or as high as 90/10.



To read more: http://www.ft.com/cms/s/0/34f98e3a-c0b4-11dd-b0a8-000077b07658.html