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Credit Crisis Private Equity is Facing

Private Equity is a $1.4 trillion dollar industry that is 68% owned by public pensions. This quarter marks D-Day for private equity because they have to mark to market the value of their holdings. Up until now they have not. In 2007 they where saved by the Federal Reserve because of the introduction of Quantitative Easing and where able to refinance their debt a lower rates. Unfortunately for private equity and ultimately us the consumer / investor, that is most likely not to happen.

2023 is the year when Commercial Real Estate has to be refinanced because it is 10 year term and most of it was financed in 2010-2012. Blackstone B-REIT is an example of a Commercial Real Estate fund that is in trouble. You can’t get your money out of that fund because Blackstone stopped all withdraws back in February of 2023 and have not allowed any since. Because most of Commercial Real Estate is due to be refinanced now at higher interest rates, WSJ Prime Rate is 8.25% a far cry from the days of cheep money. Pension funds will have to take these value market downs from Private Equity and show the loses on their books. This could be the trigger for the Credit Crisis much of Wall Street has been talking about.

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