The Bank of England is worried about the barbarians at its gate.
The UK central bank sounded the alarm yesterday, warning that the last boom in leveraged buyouts could upend the economy.
“The amount and maturity profile of buyout debt could present risks to UK financial stability,” the bank said in a report yesterday.
(Disclosure: The report cites “The Buyout of America,” a book written by this reporter.)
PE-controlled companies account for 5 percent of all corporate assets in the UK and 8 percent of corporate debt, according to the report.
US-based PE firms such as KKR and Blackstone participated in roughly half of the biggest UK buyouts during the boom that ran from 2005 to 2008.
The PE industry has defended its practices, saying it could not cause a financial crisis.
But the Bank of England believes otherwise, and is forming a committee to figure out ways to reduce the risk of another financial crisis.
In the UK, PE-backed deals pose a greater shorter-term risk than they do here, according to the report.
During the boom, many leveraged buyouts in the UK involved seven-year loans that will soon come due. While the frozen credit markets have mostly thawed here, the markets are tighter across the pond and many companies could have trouble refinancing.