The collapse of debt burdened firms that were bought up by private equity companies before the financial crisis could pose the next major risk to the stability of the UK's economy, the Bank of England has warned.
These leveraged buyouts (LBO), which are likely mature next year, pose a systemic threat that needs to be addressed, according to the Bank's quarterly update. The warning from the Bank comes ahead of a major round of refinancing. Some £32bn of LBO debt has to be refinanced in 2014 and 2015, with a further £41bn of LBO debt maturing over the following three years. "In the mid-2000s, there was a dramatic increase in acquisitions of UK companies by private equity funds. The leverage on these buyouts, especially the larger ones, was high," the Bank said. "The resulting increase in inde...
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