Two private equity companies that are about to acquire Danish cleaning services firm ISS face the danger of leverage buyout bonds.
Goldman Sachs Capital Partners and EQT’s bid ISS that amounts to $3.8 billion may create some risks linked to the bonds of leveraged buyout targets which may lead to an increase in the risk premium.
“You can never really price in the LBO risk. A buyout can take a company from BBB to B overnight,” said Gary Jenkins, credit strategist at Deutsche Bank.
The takeover bid lifted ISS’s shares 30% after the announcement Tuesday.