Poll: European PE Firms To Infuse Existing Investments

LONDON (Reuters) – More than a third of European private equity companies expect to restructure struggling portfolio companies this year, mostly by injecting new money, a survey showed on Tuesday.

The poll, by Debtwire, shows the big debts used to fund acquisitions during the leveraged buyout boom are now coming back to bite both the companies and the buyout houses that took them private.

Debtwire surveyed 30 European private equity investors and found 38 percent of respondents expected to restructure one or more portfolio companies this year. Almost three-quarters said they would do this by putting new funds into the business.

Overall, 55 percent said worsening market conditions meant they were more likely to put fresh equity into their companies.

Cheap and easy debt fuelled a wave of mega buy-outs at increasingly high multiples in recent years.

However, many debt-laden deals struck in 2006 and 2007 are running into difficulty as economies contract and debt becomes more harder to refinance.

“Many big leveraged buyouts of recent years will inevitably need to revisit their debt structures,” said Richard Nevins, a restructuring expert at law firm Cadwalader, Wickersham & Taft.

“Around half of the biggest private equity funded acquisitions may see substantial restructurings beginning as early as this year.”

The private equity industry believes restructurings will peak in the second and third quarter, the poll showed.

However, the survey also questioned 100 distressed debt investors, who expect the peak of restructurings to come later, around the end of 2009 and in early 2010.

As more companies need to restructure, banks, law firms and specialist advisers are employing teams of experts to manage the process, which often involves months of negotiations between owners, creditors and management.

On Monday, private equity firm Candover Investments Plc (CDI.L) said Rothschild had been appointed to help restructure the finances of Ferretti, after the Italian yacht builder breached its banking agreements.

In 2006 Candover acquired a majority stake in Ferretti in a deal backed by more than 1 billion euros ($1.32 billion) of debt.

(Reporting by Tom Freke; Editing by Andrew Macdonald)