Private equity dealmakers in the US are poised for higher borrowing costs as the Federal Reserve on Wednesday raised interest rates for the first time since 2023.
The rate-setting committee unanimously agreed to raise the benchmark interest rate by a quarter of a percentage point, and officials largely agreed that, at the current trend, one more hike would be needed in 2026.
The decision lifted the federal funds rate to a target range of 3.75% to 4%, in line with market expectations heading into the September meeting.
Kyle Walters, a PE ******* yst at PitchBook, described the rate hike as "directionally negative for PE exit activity," though it is unlikely to cause significant damage on its own.
"The larger question is whether this rate hike is a one-off or if more are to follow. If it's the latter, that would have a more negative impact on monetization efforts, as most LBO debt is floating rate, which results in higher interest expense on these companies, and can damage the financial statements prospective buyers look at."
#interest #damage #reserve
The rate-setting committee unanimously agreed to raise the benchmark interest rate by a quarter of a percentage point, and officials largely agreed that, at the current trend, one more hike would be needed in 2026.
The decision lifted the federal funds rate to a target range of 3.75% to 4%, in line with market expectations heading into the September meeting.
Kyle Walters, a PE ******* yst at PitchBook, described the rate hike as "directionally negative for PE exit activity," though it is unlikely to cause significant damage on its own.
"The larger question is whether this rate hike is a one-off or if more are to follow. If it's the latter, that would have a more negative impact on monetization efforts, as most LBO debt is floating rate, which results in higher interest expense on these companies, and can damage the financial statements prospective buyers look at."
#interest #damage #reserve
1 day ago
