Four out of five UK-based private equity firms expect some of their portfolio companies to breach banking covenants, according to Grant Thornton.
Four out of five UK-based private equity firms expect some of their portfolio companies to breach banking covenants, according to Grant Thornton’s private equity barometer.
Mo Merali, head of private equity at the accountancy firm, comments, ‘We will see an unprecedented wave of financial restructuring of private equity-backed companies, with banks ultimately taking control and ownership of some over-indebted companies.’
A majority (52 per cent) of the private equity professionals surveyed by Grant Thornton expect difficulties refinancing some of their portfolio companies, while only 18 per cent say they would certainly not face such problems.
One respondent to the survey remarks, ‘Lenders have the power and we have to get used to it’.
Some 73 per cent of investors foresee a net increase in the number of companies in their portfolio over the next 12 months. Poor exit prospects have not dampened hopes for performance, with 61 per cent of those surveyed estimating annual returns of between 11 and 25 per cent.