The Buyout BOOM Before the Buyout BUST

KKR Buyouts to Test the Stretched Credit Market KKR has taken the private-equity acquisitions boom to extremes. But as its biggest deal yet awaits financing, the fortunes of more than the firm are at stake.

By David Cho and Thomas Heath Washington Post Staff Writers Tuesday, September 11, 2007; D01

Wall Street may be facing its worst financial storm in years, but billionaire buyout king Henry Kravis is forging ahead with the biggest deals in U.S. history. Kravis's firm, Kohlberg Kravis Roberts, has made deals for $123 billion in acquisitions this year, more than its three chief rivals combined.

. . . the firm's record $45 billion purchase of Texas utility giant TXU, approved by shareholders last week, exemplifies the freewheeling borrowing that defined the golden age of private equity in the past few years. . .

. . . Now debt markets are closely watching the latest drama involving KKR -- the attempt to push its massive, debt-laden purchases through the financial system. . . If they fail, several analysts said, it could well mark the end of the private-equity frenzy that has transformed the financial world. . .

--read more-- _____________________________________________________________________ If capitalism has one defining aspect, it is its unfailing ability to invent new paths to the acquisition of great wealth.They all soar across Wall Street like Haley's Comet, all have their defenders who claim a 'new paradigm' has been achieved, all create investor frenzy and all end in the burst of a bubble.

Hedge funds were supposed to be the miracle shock-absorber to the more ebullient ups (and downs) that so annoyed investors. They have recently shocked more than they have absorbed.

Taking public firms private is a very good idea and has many aspects to recommend it. But the laws and rules of excessive debt and unbridled enthusiasm, ignored with unnerving consistency, have not yet been revoked.

Our nation has been living the dream, high-rolling on debt both personal and national. For that we can thank the demise of the dollar, whose value has fallen by half in the past six years and may not yet have found its lowest level.

Where Mr. Kravis and his 'new paradigm' fits into this scenario will be interesting to watch.