Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Will junk slump slow buyout binge?

May 6, 2011: 2:05 PM ET

Private equity firms have agreed to more than $100 billion of deals in 2011, with the news that Access Industries is buying Warner Music Group for $3.3 billion. That is more than twice the global private equity volume at this time last year, according to Thomson Reuters.

The majority of that activity has been in the U.S., with Asia placing a distant second.

But this isn't to say everything is wine and roses. There's a bit of nervousness building over the future of high-yield bond issuance, which is the engine that juices leveraged buyout returns.

U.S. high-yield issuance totaled just $23.3 billion in April, according to Standard & Poor's LDC. That's a 23.36% drop from $30.4 billion in March issuance, and also a bit below the 2011 monthly average of $25.3 billion (which includes the April figure!).

Moreover, high-yield mutual funds and ETFs experienced retail cash outflows for the final two full weeks of April, before rebounding during the most recent week (according to Lipper FMI). And then there was that whole episode in which Lee Enterprises pulled a $1.1 billion offering due to an apparent lack of interest.

To be sure, both high-yield and overall leveraged loan issuance are way up over 2010 levels. And the above examples could just be meaningless blips. So consider it something to watch, while PE firms invest their next $100 billion...

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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