"The private capital industry’s problems are far worse than Wall Street has acknowledged, as traditional metrics obscure weaknesses in the leveraged buyout market, according to a top credit hedge fund.

A “substantial portion” of the private equity industry is already “stressed or distressed”, said Tony Yoseloff, managing partner and chief investment officer at credit hedge fund Davidson Kempner Capital Management.

“You’re not looking at a problem five years from now, you’re looking at a problem that exists today.”

In new research to be published on Monday, the hedge fund, which manages more than $38bn of assets, gives a broad diagnosis of growing risks in the private capital industry, and why it soon expects buyouts from the last decade to crack. The hedge fund argues excessive leverage, weak cash flows and loose debt contracts have converged to create a ripe environment for corporate defaults."

https://www.ft.com/content/f77b2891-5d83-47a1-a328-1b526073a266