LBO funds steer their steady course

Despite dropping credit quality, acquisition prices are skyrocketing, with the result that more investors are recycling their investments

Deterioration in credit quality of firms involved in European leverage buy-outs (LBO) has made credit analysis all the more important for hedge funds specialising in it, according to analysis by Standard & Poor's.

In the 18 months to the middle of 2005, says the ratings agency, LBO quality has "deteriorated significantly" according to Paul Watters, S&P's primary analyst.

"Particularly at this stage in the economic cycle, it becomes increasingly important to assess the quality and seniority of the

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