Wall $treet Folly: Henry Kravis: What bubble? The "Stars are aligned" and the "Golden Era" of buyouts is set to continue; On the flip side, preparing for the inevitable crash, Distressed Debt hires the best since 2002
Borrowing costs keep buyouts affordable, Kohlberg Kravis Roberts & Co. co-founder Henry Kravis said.
``The private-equity world is in its golden era right now,'' Kravis said today in a speech at the annual meeting of Canada's Venture Capital & Private Equity Association in Halifax, Nova Scotia. ``Stars are aligned, there is plenty of capital on one side, and you have a very receptive community of companies.''
Buyout firms spent $911 billion worldwide to acquire companies last year, an almost ninefold increase from the $106 billion total in 2001, Kravis, 63, said. About two-thirds of the money needed for most transactions is borrowed. The amount of extra yield investors demand to hold speculative-grade bonds over similar maturity U.S. Treasuries narrowed to 2.45 percentage points May 25, compared with a record low set Oct. 17, 1997, according to Merrill Lynch & Co. indexes.
Low interest rates mean yields on investments such as U.S. Treasuries are relatively low, spurring investors to explore asset classes such as private equity. According to the New York- based firm's Web site, its holdings were valued at more than $74 billion as of December on about $30 billion of invested capital. It's completed about 150 deals since it was founded in 1976.....