ATE equity firms may need to inject some €450bn (£384bn) of new equity into their portfolio companies as wary banks cut back on money they will lend against these assets, Terra Firma boss Guy Hands said in a speech yesterday.
Hands, who has been in the spotlight for the collapse of his £4bn EMI deal, said that some €3 trillion worth of “leveraged deals” would need to be refinanced between 2013 and 2015.
“These refinancings will require the investment of substantially more equity,” he said in a speech at the annual Superinvestor conference in Paris.
Hands said loan-to-value (LTV) ratios for bank loans were likely to be closer to 60 to 70 per cent compared with 85 per cent at the height of the buyout boom.
That means private equity funds will have to tap investors for more cash and will have less to spend on new acquisitions at a time when the market will be flooded with potential buyout opportunities, Hands warned.