Private equity and investment banks make strange bedfellows. Late last year,
Hands, himself a former banker at Nomura and Goldman Sachs, later apologised for his remarks, but not before the loyal dogs sent him a box of dog biscuits and a note to use them sparingly with his bankers. Their second response was to investigate ways to shift some of that overhang from their balance sheets.
At the time,
This was a surprise, as Citi would no doubt be near the front of the queue for those wishing to sell off their portfolios of loans, which included financing for the US$26bn takeover of
The buyer in both of those deals? KKR. And TPG for TXU. Talk of that JV now appears to be dead and instead, Citi is now the vendor in a US$12.5bn sale of its US$43bn loan portfolio in order to reduce its balance of debt. KKR is not a buyer but TPG, on the other hand, is – along with buyout behemoths
Deutsche Bank’s portfolio of loans includes the US$17.1bn buyout of US casino group Harrah’s Entertainment by – here boy! – TPG and Apollo Management; and the £11.1bn take-private of UK retail chain Alliance Boots by – fetch! – KKR. Proof, if any were needed, that private equity is relentless and can adapt to any market. And that you couldn’t make this stuff up!
One package of loans that won’t make it out of the doggie bowl, though, is the £2.4bn provided by Citi for last year’s £4bn purchase of
That private equity firms can profit from buying these loans is not in doutb, the returns are fantastic and the risks are low – leading to another doggone certainty – that the banks will keep whimpering and private equity will keep hitting them while simultaneously tickling their tummies.