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Investment funds under pressure

Week 11, 2008
  • Carlyle Capital missed margin calls with banks on financing for its US$ 21.7 billion (EUR 14.1 billion) portfolio of residential mortgage-backed bonds. Carlyle Group, which manages some US$ 75.6 billion (EUR 49.2 billion) in 59 funds, has already increased a credit facility provided to the fund to US$ 150 million (EUR 97.6 million). As a result, shares in Carlyle Capital slumped as much as 28% after a two-session suspension Tuesday March 10.
  • KKR (Kohlberg Kravis Roberts) which filed its documents to go public with the Securities and Exchange Commission last July, has since amended its registration statement twice to postpone the IPO date.
  • David Bonderman, TPG (Texas Pacific Group) founding partner predicted a 40% drop in deals from the US$ 900 billion (EUR 586 billion) or so of deals done last year, and said he thought it would take the rest of the year for banks to clear their backlog of debt. Last summer crisis triggered a credit crunch making large leveraged buyouts near impossible to finance.

Our electronic transactions industry is directly involved with the global venture market. Major funds are invested in the large players of our industry: TPG is a major shareholder of Gemalto, KKR owns First Data, etc…

The consequence of this crisis is that access to capital is becoming harder for industrial companies. And for those in which investments funds are already present, the pressure on results will increase even more.

We may be in 2008 in a situation where we are on a growing market, but where limited access to financial resources limits the development of our industry. This could be favorable to companies that are owned by family groups, or by small organizations, as they will not be under investment funds pressure.

Thierry Spanjaard
Chief Editor
Smart Insights