Business Insight Zone

The long, high-flying run of the private equity business has been fueled, in part, by ready access to piles of debt financing. But now the debt markets are suffering, to the point that big-ticket deals could threatened. Last month, Royal Ahold had to restructure, and then postpone, its $7 billion deal to sell U.S. Foodservice in a leveraged buyout. That deal was eventually completed, but with nothing like the smooth sailing that Ahold or the buyout firms (KKR and Clayton, Dubilier) would have liked. (Deals like this have also left big banks like Goldman and JPMorgan “with at least $11 billion of loans and bonds they can’t readily sell.”)

This is serious business, because private equity firms have relied on straightforward (and copious) debt financing for their record run of buyouts. If the debt markets don’t reverse their bearish ways, it won’t be surprising if, say, the Cerberus buyout of Chrysler runs aground — or at the very least costs much more than it would have a few months ago.