Tags: Fed | LBO | market | revive

BofA Strategists: Fed Easing Will Revive LBO Market

Wednesday, 07 Nov 2012 10:53 AM

By Dan Weil

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
The Federal Reserve’s quantitative easing (QE) program might bring on a new wave of leveraged buyouts (LBOs), which were popular during the 1980s and 1990s, according to a new Bank of America Merrill Lynch report.

The study, written by BofA credit strategists Hans Mikkelsen and Yuriy Shchuchinov and obtained by Business Insider, says that conditions have turned "unusually conductive for leveraging transactions for this stage in the typical cycle."

That means investors “should be concerned about more extreme releveraging in the form of leveraged buyouts," the duo writes.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

QE reduces interest rates for borrowers, such as buyout artists. And reduced rates lead banks to take their capital from low-yield bonds and put it into higher-yielding assets, such as LBO loans, according to the report.

The BofA analysts think deals will start small, generally less than $5 billion, with a few hitting $10 billion.

“However, in an era of historically low yields and abundant liquidity in the public markets, with banks having finally rebuilt capital, we think we have the ingredients in place for even larger deals, up to $20 billion,” Mikkelsen and Shchuchinov write.

Buyout firms apparently have plenty of firepower to pull off LBOs. They had more than $1 trillion of committed capital that hadn’t yet been invested at the end of 2011, according to research firm Preqin.

Global mergers and acquisitions fell to $466 billion in the third quarter, their lowest level since the end of the financial crisis, according to Bloomberg.

Editor's Note: This Wasn’t an Accident — Experts Testify on Financial Meltdown

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Country
Zip Code:
Privacy: We never share your email.
 
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Kudlow: Obama's Head Will Spin From New Conservative Agenda

Friday, 24 Oct 2014 21:35 PM

The vast majority of political journalists , and I include some of my conservative colleagues , are missing a very big s . . .

Stocks Rise on Earnings, S&P 500 Caps Best Week Since 2013

Friday, 24 Oct 2014 17:09 PM

U.S. stocks rose, with the Standard & Poor's 500 Index capping its best week since 2013, as companies from Procter & Gam . . .

Investors Sour on Dollar After Strong Rally

Friday, 24 Oct 2014 14:32 PM

My how things can change.
Just three weeks ago the dollar hit a six-year high against the yen and a two-year high  . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

 
NEWSMAX.COM
America's News Page
©  Newsmax Media, Inc.
All Rights Reserved