AMWatch

Debts at PE-owned firms swell to alarming level, says Moody's

The Danish financial watchdog is sounding a warning bell over banks' eagerness to lend money to private equity firms and pension funds in order to finance investments.

Photo: Arkiv/Ritzau Scanpix/Torben Christensen

In November last year, the Danish financial supervisory authority (FSA) reprimanded Nykredit and Jyske Bank, because they took on risks that were too large when private equity firms and pension funds asked to borrow money to finance their acquisitions.

The problem goes beyond Denmark's borders. According to news service Finans, a new Moody's report finds that "the pool of private-equity-owned companies with weak credit ratings is swelling to an "alarming" level". About 90 percent of companies owned by private equity firms are rated at least five levels below investment grade.

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