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...firm Alchemy Partners, drew media attention by highlighting the excesses of the private equity industry over the last few years.
His views were echoed by, among others, Ian Gilday, managing director in Goldman Sachs' European leveraged finance team based in London, who acknowledged that bankers had "lost track of some basic principles of banking" in the middle part of this decade as they were transfixed by irrational exuberance and soaring asset prices.
Gilday set out a compelling analogy illuminating bankers' present predicament. He drew a picture of a building with three rooms: the first was filled with a large group of bankers sheltering from the storm outside; they had no doors or windows and they spent their waking hours wrestling with the mountain of distressed debt they had on their books. The only way their problem would be solved would be to reprice the debt they held.
[ILLUSTRATION OMITTED]
In a second room, another clutch of bankers had some windows to look through and the weather outside was brightening up. In this room it was still possible to transact deals although gearing ratios and appetites for PIK and other subordinated debt were suppressed.
The third room had open doors and contained no bankers at all, but was populated by structured finance professionals. Their main concern was to work out how to allocate their large stock of cash; much of it looked as though it was going to be channelled into far off centres in the emerging BRIC (Brazil, Russia,...
NOTE: All illustrations and photos
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