Buyout Industry Staggers Under Weight of Debt

[RamboLiberal]

Source: NY Times

With their big paydays and bigger egos, private equity moguls came to symbolize an era of hyper-wealth on Wall Street.

Now their fortunes are plummeting.

Celebrated buyout firms like the Blackstone Group and Kohlberg Kravis Roberts & Company, hailed only a year ago for their deal-making prowess, are seeing their profits collapse as the credit crisis spreads through the financial markets.

Investors fear that some of the companies that these firms bought on credit could, like millions of American homeowners, begin to buckle under their heavy debts now that a recession seems almost certain. The buyout lords themselves suddenly confront gaping multibillion-dollar losses on their investments.

On a day in which the stock market tumbled to its lowest point in two years and rumors flew that a major Wall Street firm might be in trouble, Blackstone said Monday that its profit had plunged.



Read more: http://www.nytimes.com/2008/03/11/business/11equity.html?hp

---

I never got past basic college economics yet even I could've predicted this would happen. Just like the internet bubble of the 90's it was all being done on smoke and mirrors.