Buyout debt slumps to its cheapest ever

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Tom Attwood, managing director of Intermediate Capital Group, said that very few new deals are being done in the debt-financed or leveraged buyout market, indicating the levels of distress in the financial and corporate markets.

However, the secondary market in re-financing previously-done deals is awash with bargains, he said.

"The primary market is completely shut other than in those instances where the vendor helps the purchaser in the financing of a deal," said Attwood.

"But in the secondary market the yields on senior debt are as high as 30%, something which we had not anticipated."

"We are seeing senior debt changing at hands at between 50p and 60p in the pound.

"For very high quality, really good companies, the sort of debt that you would sell your grandmother is trading at between 70p and 80p in the pound.

"That is something I have never seen before. It's shocking and bears comparison even with the sort of things seen in 1980 and in 1974."

Attwood said those with the wherewithal — ICG has more than 9 billion (£8.5 billion) under management investing in debt and equity in leveraged deals — can pick and choose from portfolios of debt being offered by the banks and credit hedge funds which are attempting to clean up their balance sheets and divest their positions.

More and more secondary deals are reckoned to be about to come on to the market as the equity components of private-equity deals are increasingly wiped out by falling asset values.

"It is time to be patient and to be cautious," said Attwood. "There are plenty of attractive investment opportunities that have not yet been sold on."

Net new lending by ICG in the October to December trading quarter came in at £41 million compared with £242 million in the preceding six months and £289 million in the same quarter of 2007.

ICG admitted its own investments are also suffering. It said 13% of its portfolio in on a "watchlist" as deteriorating economic conditions take their toll.

ICG shares today tumbled 15%, down 841/2p at 491p.