Quote of the Day: Rewriting Mega-LBO History

During a media call earlier this morning, Blackstone Group president Tony James was asked about the general status of mega-buyouts done in 2006-2008. He declined to discuss any specific deals (Hilton, Freescale, etc.), but did say the following:

“One of the things unique about the big buyouts done in last few years was they have massive debt instruments out there which trade. I’m talking more about US ones than European ones… What’s happened in past cycles of LBOs is you overleveraged it or overpaid… you were stuck, locked in time. Now these big U.S. buyouts, because the debt trades… You can rewrite history in a sense. You can come in with more equity, buy debt at a discount, swap senior instruments for subordinated instruments… There is lots of flexibility to work with. You can actually change the cap structure and, in so doing, reduce original purchase price.”