Is it actually distintermediation if the thing being disintermediated has ceased to function?
Henry Kravis of Kohlberg Kravis Roberts said in Davos that, as in essence banks aren’t playing their role of intermediating debt capital for buyouts, he would be going straight to the source, doing deals directly with investors who want to fund debt for deals.
Of course many of the institutions that used to fund buyouts, CLOs and CDOs for example, no longer exist and many like hedge funds have lower appetite. He acknowledged that leverage has “come down tremendously,” which might get the prize for biggest understatement of the week.
But, like Steve Schwarzman of Blackstone earlier in the week, he maintained that lower asset prices for deals originated now would help returns.
“You might be able to buy it with less leverage and you can still get the same returns because of the purchase price you are paying.”