Colin Barry

AXA [European PE] and the Diana Company (EF, Friday, Week 7)


Attractive LBO candidates: well-positioned for growth + can lever up with cheap, covenant-light debt

Effects of leverage

Rollover risk is a big danger in financing through balloon loans (and many other LBO-type strategies).
No one really expects repayment of principal at maturity, but situation can get really sticky if you need to roll over in the middle of a financial crisis --- when absolutely no lending is happening.

Colin's cynical takeaway: Everybody has to pay their debts --- except if they are well-resourced enough to find other people to pay their debts for them.