TPG’s Bonderman Sees $15 Billion LBO, Says Bond Market ‘On Fire’

TPG Capital founding partner David Bonderman
TPG Capital founding partner David Bonderman said financing for leveraged buyouts is available on attractive terms, with deals of $10 billion to $15 billion absolutely possible. Photographer: Jamie Rector/Bloomberg

TPG Capital founder David Bonderman said a $15 billion leveraged buyout is possible in the current climate, with funding available “on attractive terms.”

“We are back in the environment which is about as good as it has ever been, not quite at the amount of volumes in the days of 2006 and 2007 when we could to a $20 billion or $40 billion buyout,” he said at the SuperReturn conference today in Berlin. “It’s absolutely possible to do a $10 billion to $15 billion deal. The capital is available.”

Leveraged buyout firms like TPG pool money from investors to take over companies, financing their purchases mostly with debt, with the intention of selling them later at a profit. The firms are resuming acquisitions after the credit crisis brought deal-making to a near halt in 2009. Firms have led $54 billion of takeovers this year, more than double the amount in the same period last year, according to data compiled by Bloomberg.

Blackstone Group LP, KKR & Co. and other private-equity firms are also taking advantage of record investor demand for high-yield debt to refinance buyout-related loans and bonds as the Federal Reserve holds benchmark interest rates near zero to stimulate the economy. The wall of bonds and loans maturing through 2014 has crumbled by 44 percent since 2009 to $671 billion according to JPMorgan Chase & Co.

“The wall of debt is turning out to be no wall of debt at all,” Bonderman, 68, told the conference. “Debt markets are very robust. The bond market is on fire.”

Yields on junk bonds have fallen from 7.85 percent at the end of last year, reaching a record low 7.285 percent Feb. 22, according to Bank of America Merrill Lynch index data.

Bonderman founded TPG 19 years ago with Jim Coulter. Today, the Fort Worth, Texas-based firm manages about $48 billion of investments. TPG’s deals include the $43.2 billion purchase of Texas power producer TXU, now known as Energy Future Holdings and the $27 billion takeover of casino company Harrah’s, now known as Caesars Entertainment.

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