There is no way that Freescale and NXP can repay the debt which has been loaded on to them by their private equity owners, according to Jerome Ramel, of Exane BNP Paribas, talking this morning to the European Nanoelectronics Forum 2008 in Paris. "There is no way they can repay the debt they have", said Ramel. The debt imposed on Freescale and NXP by their private equity owners, Blackstone and KKR, could not be repaid even if they are broken up and sold off piece-meal, said Ramel, so the only way forward for them is consolidation. "Refinancing will kill some businesses," Ramel told the Forum. Asked by Electronics Weekly how Freescale and NXP would cope with the re-financings they will be obliged to undergo starting in 2011, Ramel replied: "Freescale was bought at 4 times sales, NXP at 1.6 times sales. The valuations were too high. The private equity companies thought there was something wrong about an industry which operated without any debt."
There is no way that Freescale and NXP can repay the debt which has been loaded on to them by their private equity owners, according to Jerome Ramel, of Exane BNP Paribas, talking this morning to the European Nanoelectronics Forum 2008 in Paris. "There is no way they can repay the debt they have", said Ramel.
The debt imposed on Freescale and NXP by their private equity owners, Blackstone and KKR, could not be repaid even if they are broken up and sold off piece-meal, said Ramel, so the only way forward for them is consolidation. "Refinancing will kill some businesses," Ramel told the Forum.
Asked by Electronics Weekly how Freescale and NXP would cope with the re-financings they will be obliged to undergo starting in 2011, Ramel replied: "Freescale was bought at 4 times sales, NXP at 1.6 times sales. The valuations were too high. The private equity companies thought there was something wrong about an industry which operated without any debt."
And big engineering companies need such cash to be able to survive glitches or downturns. In that case, Alstom was brought to its knees by problems on its new gas turbines (purchased from ABB with probably not enough due diligence, but that's another issue) which required it to pay massive penalties to clients.
With the cash, it would still have had the problems, but would have survived the episode. In the long run, we're all dead. John Maynard Keynes
