Alternative investments alongside the stock market: Private banks attract rich customers

Zurich Debt-financed takeovers are currently promising investors whopping returns. The skin care specialist Galderma is a prime example of this. The former skin care division of Nestlé was bought in 2017 by the private equity firm EQT and other investors for CHF 10 billion and is now to be taken public at a 100 percent profit.

To finance the takeover, the private equity firms had placed loans of around three billion dollars with investors. The latter could look forward to a premium of four percentage points on the Libor interest rate – the reference interest rate as the basis for interest on loans. Loans running until 2026 are currently yielding almost nine percent per year.

If all goes according to plan, the deal will yield returns for both EQT and Adia private equity fund investors and credit tranche investors that are difficult to match elsewhere in equity and bond markets.