The party is over

01 October 2008

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These were the words of Nancy Pelosi, the Democratic house speaker, when she gave her speech on why Congress would reject the bailout plan to save American banks. At the time of writing, there is still uncertainty regarding whether or not the revised rescue plan will be passed or not. Regardless of the outcome, it seems the world economy went straight from the party into a hammering hangover. Until late September the Nordic region had seemed fairly well insulated from the banking crisis, with a few exceptions such as Roskilde Bank in Denmark. But in the space of a few days Glitnir went bankrupt, Swedbank started trembling, and an increasing number of Nordic banks were downgraded by the ratings agencies. As a result banks have tightened their belts on lending and increased interest rates. Subsequently, this month has seen some deals reporting an equity/debt ratio of 50/50 as opposed to the extremes of 20/80 and even 10/90 seen this time last year, even as the rest of Europe had already begun to feel the squeeze

At a private equity conference earlier this month, one industry professional said, "The banks are the monsters," following IK Invest partner Gustav Ohman's rather pessimistic talk on the outlook for buyout activity. Buyout houses do indeed have less reason to be optimistic; 3i reduced new investments by nearly 40% in the first five months of its financial year, while banks are increasingly worried about the state of their loan books and are being stricter on demanding covenants. One man who was smiling thoughout was Eqvitec's head of Mezzanine, Perrtio Nurmio, who recently held a first close of Eqvitec's third mezzanine fund on EUR54m, with prospects of a final close of EUR100m in the near future. He expects a busy year ahead with more deals needing other means of funding to fill the gap between equity and debt. Indeed, most men's loss is at least one man's gain.

Commentators have drawn comparisons between the current financial markets and Greek tragedies, which is rather worrying, as a tragedy with a happy ending would be a rare thing indeed. Nonetheless, an adviser recently told me he has a few strong exits in the pipeline, an improvement on the single recap this month. So perhaps there will be northern lights at the end of the tunnel after all. One can only continue to buy-and-build, and hopefully avoid the bailout.

I hope to see many of you at the Nordic unquote" Private Equity Congress in Stockholm on 6 November to discuss the state of the market with you. More information is available at www.nordicpecongress.com.

Yours sincerely,

Rikke Lilla Eckhoff

Nordic Editor, unquote"

Tel: +44 20 7484 9824

rikke.lilla-eckhoff@incisivemedia.com.