Private Equity’s Latest Move to Gin Up Cash: Borrowing Against Its Stock Holdings
- Cinven, Blackstone, KKR borrowed against stock holdings
- It sometimes leaves investors at mercy of markets and rates
Biologists of the Synlab laboratory prepare to collect samples at a COVID-19 coronavirus testing center in Lens, France in May 2020.
Photographer: Denis Charlet/AFP/Getty ImagesThis article is for subscribers only.
Cinven’s clients got some unwelcome news last year: the buyout firm’s financing tied to a lab-testing company wasn’t going well. Instead of getting a windfall, clients had to ante up more cash.
It turned out Cinven had borrowed against its stake in Synlab AG, a move that typically would boost everyone’s cash distributions. Now, though, shares of the company Cinven took public in 2021 were plunging as sales of Synlab’s Covid tests faded along with the pandemic.