Firms & Funds

Debt providers ponder Brexit uncertainty, LBO slowdown

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Brexit Nigel Farage
Nigel Farage, leader of the UK Independence Party, makes a statement after Britain voted to leave the EU, in London on June 24, 2016. Photo courtesy Reuters/Toby Melville - RTX2HYFB
  • Oaktree’s Howard Marks ponders long-term impact
  • Antares executive David Brackett mulls M&A slowdown
  • Central bankers pledge liquidity into the lending system

Distressed-debt specialist Howard Marks of Oaktree Capital Group said he doesn’t see any long-term fundamental economic shift in Europe as a result of the surprise Brexit vote, but he said it’s created uncertainty in the marketplace.

Also on the lending front, David Brackett, managing partner and co-CEO of Antares Capital, said it may take longer to finance deals for middle-market leveraged buyouts.

The comments from Marks and Brackett came as central bankers moved to calm financial markets in the face of the June 24 results in favor of the U.K. pulling out of the European Union.

“The Federal Reserve is prepared to provide dollar liquidity through its existing swap lines with central banks, as necessary, to address pressures in global funding markets,” a statement from the U.S. central bank said.

The Fed said the change “could have adverse implications for the U.S. economy.”

Marks flags uncertainty

Through his lens as co-chairman of the distressed-private-debt firm, Marks said it’s impossible to predict the immediate impact on Europe and the U.K.

“There’s no history for this kind of development,” Marks said in an interview with Bloomberg. “I don’t see how anybody can be confident that they know what it means. I think these economies will slow down.”

He also sees a psychological effect that may cause people to spend less and invest less, but people’s lifestyles may not change that much in terms of economic consumption.

“The reaction is very strong in the markets, but the question is, are people going to live differently? Are people going to produce less and are people going to buy less?” Marks said. “Other than psychological contagion, which should not be underestimated, I don’t think that this is a fundamental catastrophe.”

Brackett of Antares said it’s too early to gauge the impact of the Brexit vote. “Our experience is that uncertainty extends deal processes, slowing down merger and acquisition activity,” Brackett said in an email to Buyouts.

Action Item:  Latest public statements from The Fed, http://1.usa.gov/28TfVKg