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PE HUB Wire Highlights, 12.19.18

Neuberger settles with SEC over improper expenses in Dyal funds; Centerbridge to buy Civitas Solutions for $1.4 bln

Companies should go on holiday after having their holiday parties. Not that I’m complaining, Hubsters, or that I imbibed yesterday at our holiday party. No, not me.

Quartz has a story this morning on the dangers of private equity and all the debt the firms are issuing. Private asset managers raised a record of nearly $750 billion globally in 2017, according to McKinsey and Co.

The top 10 ratings on Moody’s Investors Service credit-rating scale range from Aaa to Baa3 and are considered investment grade, which means there’s an excellent-to-good chance you’ll get your money back, Quartz said. The bottom 11, from Ba1 to C, are junk, the story said.

Quartz pointed to a Moody’s report that said 90 percent of debt issued by private equity is rated B2 or lower. Investors are tolerating all this “no-good debt” because while it may be terrible, it also pays a lot of interest, Quartz said. The story then mentions Leon Black’s warning a few weeks ago that the amount of “covenant-less debt is more than 2007,” when the last financial crisis kicked off. Count yourself warned.

Hat tip to Forbes for its podcast Q&A with Matt Harris of Bain Capital Ventures, who gives a fascinating overview of fintech. Harris discusses whether real estate tech is the fifth segment of fintech and also gives an overview of insure tech.

Funds and DealsCenterbridge Partners is buying Civitas Solutions, a provider of home and community health services to people with disabilities, for $1.4 billion. Vestar Capital is a seller. Check out our brief here.

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