Thursday, January 15, 2009

Private Equity to Sift For Cement Shoes

The Wall Street Journal reports that HeidelbergCement, whose CDS jumped by about 300 bps since when we wrote about the brewing troubles at the German cement maker, may be bailed out by Goldman Sachs and TPG who are allegedly considering buying a stake, while French buyout house PAI is evaluating its own investment.

With Adolf Merckle's 25% stake currently in limbo an acquisition would make sense. However, with the CDS trading at an implied 50% chance of default within a year, and suitors will likely need to do a global recap as part of an acquisition which will need to eliminate at least half the outstanding debt for this to continue as a viable concern. Either way, the CDS should be an interesting play as it could move quite aggressively in either direction as this saga develops. Sphere: Related Content
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