Triago: GPs Rushing to Spend $193 Billion in LBO Commitments

GPs are scrambling to spend an estimated $193 billion in LBO commitments that are expiring over the next 16 months, Triago says in its latest quarterly report.

The global placement agent says this capital bulge is the biggest ever set to expire in such a short time frame.

But on the flip side, as commitments on LP capital expires, the money reserved against capital calls from GPs will be freed up for new investment. This may help annual fundraising volume return to a sustainable range of $300 billion to $400 billion as soon as 2013, Triago says.

Still, Triago says a “significant percentage” of the record 1,900 PE funds currently targeting $800 billion will fail to meet their goals. A growing number of GPs are likely to miss their fundraising targets next year as more adopt deal-by-deal structures.

Triago estimates fundraising this year should reach $265 billion, a 15% jump over 2011.

Other insights from Triago?

  • Predictions of an imminent spike in bankruptcies among PE owned companies are “alarmist,” given the progress in cutting the leverage debt wall. The amount of leverage due by the end of 2015 has dropped some 50% since January to about $90 billion, Triago says citing figures from Standard & Poor’s LCD.
  • Fundraising market-share for U.S. strategies rose in the first half of 2012, at the expense of most other regions.
  • Insurers remain net buyers in the private equity secondary market.
  • About 11 percent, or $12.5 billion, in committed capital remains unspent in funds-of-funds from the 2007 and 2008 vintages.
  • Also, the Triago roundtable has a GP, an LP and an academic discuss the European sovereign debt crisis and its impact on PE investing.

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