While the end is clearly not near, is it possible that the current leveraged buyout cycle is starting to show signs of stress?An interesting chart in the June 8th Wall Street Journal points out that companies going private are showing a reduced ability to pay their interest obligations. The measure of cash flow known as the interest coverage ratio is declined from a peak of 3.4 times in 2004 to a ten year low of 1.7 times in 2007.
Is the storm of turnarounds and loan defaults just around the corner? Which banks will be the early losers and qualify as "stupid bankers"?
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Related Tags: Wall Street Journal, leveraged buyout, interest coverage ratio
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