Private Equity: Boom and Bust?

Viral Acharya, Julian Franks, and Henri Servaes
Journal of Applied Corporate Finance. 2007.
Vol. 19, no. 4.

This article focuses on the role of debt syndication, in the form of CDOs and CLOs, in contributing to the high prices and leverage in the recent wave of private equity transactions. The authors' principal concern is that lack of information about who holds the debt could exacerbate the effect of a shock to the LBO sector on the liquidity of financial institutions generally. The main policy prescription is increased disclosure of such holdings.