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Typical duration/maturity for private equity/LBO debt?


Well, I thought google knows everthing, but I can't seem to find the answer. I am trying to get an estimate of the typical duration (or maturity) of the debt being issued by private equity firms to fund their acquisitions, or so called LBO (leveraged buyout) deals. My guess is that it is 5 years, but maybe I am wrong. I am more interested in the current situation in the United States, but it would be very helpful if somebody could offer historical or global perspective, as well as comment on the motivation to chose that particular duration vs another one, or chose between a loan and debt.

A typical PE firm tends to leverage its buyout with a combination of debt, which can be regular bank debt and mezzanine type funds. The former would be at bank issued rates, and maturity and may be subject to stronger covenants. The latter, however, may be funds sourced by the PE from its own sources, which are generally provided at a higher rate of interest. In this way, the former can be a regular duration of about 5 years, and longer subject to some tight covenants. The latter can be of even shorted duration. A lot would depend on the PE fund's exit strategy.

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