Credit Crunch Rocks LBOs

Fears of risky debt ripples through global markets
A view of the floor of the New York Stock Exchange (AP Photo/Henny Ray Abrams, file)   (Associated Press)
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(Newser) – Leveraged buyouts, which have fueled Wall Street booms with offers of huge premiums on shares of target companies, are sputtering to a halt, the Wall Street Journal reports. Private equity firms, which just weeks ago were predicting acquisitions worth $100 billion and more, are now finding large-scale borrowing too expensive to make deals worthwhile.

Some bankers predict that financing may soon carry rates of 4 percentage points more. That's real money—$40 million on a $1 billion deal. "It's clear that it's not going to be so easy to get that financing," said one expert. "The stock market is sitting up and saying maybe these takeover premiums aren't warranted any more."