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Boom pulls the right levers

The leveraged buy-out market in Europe is booming as shareholders press European companies to focus on core businesses and indebted firms shed assets. Even after private equity firms’ write-downs of portfolio companies, there’s lots of capital chasing bargains.



There have been 14 leveraged buy-outs (LBOs) of $1 billion or larger in Europe so far this year and the total value of announced deals in the year to mid-November was up 15% on the the figure for the whole of 2001.

Banks are developing new ways of distributing the senior and subordinated debt needed to complete seemingly ever-larger deals in a credit-sensitive marketplace. In the process, they are also taking the pressure off their own balance sheets.

With a record e13 billion coming to market in the third quarter of 2002, there is little doubt that these are happy days for Europe's leveraged finance professionals. The arrangement and distribution of leveraged loans is providing valued income at a time when big-ticket M&A deals are few and far between.

Financing leveraged takeovers at this point in the credit cycle isn't easy, no matter how cheap assets look. But syndication professionals at commercial and investment banks are proving adept at creating new structures to liberate some $50 billion in private-equity capital aimed at profit-driven European corporates as they pare down operations at the bottom of the business cycle.

Vijay Rajguru, the London-based head of leveraged loan distribution at Barclays Capital, says: "We have a very healthy pipeline of deals for the first quarter of 2003.



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