The LBO Time Bomb That Should Be Scaring UK

Article excerpt

Byline: Nick Goodway

IT'S scary numbers time.

[euro]130 billion ([pounds sterling]109 billion): the cost of the second Greek bailout plan which, fingers crossed, will pass yet another crucial deadline today.

[euro]530 billion: the amount of money the European Central Bank lent cheaply to eurozone banks last week to add liquidity to the system. Shame the banks then seemed simply to lend it back to the ECB.

?[euro]420 billion*: the amount of European bank loans to leveraged buyouts which mature between now and 2016.

(*Scary estimate courtesy of Dealogic and Linklaters).

If, like me, you treat the first two numbers with some scepticism (the first is a sticking plaster and the second a pint of weak lager), you should at least start to be worried about the last one. This is a real number. It is the amount that buyout companies will have to refinance over the next five years.

Typically these were loans on seven to 10-year terms issued by banks as the LBO market peaked in 2008 just ahead of the collapse of Lehmans. …