Widespread job losses on cards, warns union

[Omaha Steve]

http://www.ft.com/cms/s/0/97da4638-b1ec-11dd-b97a-0000779fd18c.html?nclick_check=1

Widespread job losses on cards, warns union

By Krishna Guha and James Politi in Washington

Published: November 14 2008 02:00 | Last updated: November 14 2008 02:00

The next phase of the credit crisis could see a cascade of defaults on private equity deals that would result in large-scale job losses and further damage to banks, Andy Stern, head of the Service Employees International Union, warned yesterday.

Mr Stern, one of the most influential figures in the US union movement and a longtime critic of private equity, called on policymakers to prepare for this threat by demanding disclosure of the financing arrangements used to back buy-out deals.

He urged the Federal Reserve and US Treasury to make full group-wide transparency a precondition for any buy-out firm that might seek capital from the troubled asset relief programme (Tarp), and warned against allowing private equity firms to build stakes in banks.

Mr Stern said that a large number of buy-out deals would breach their loan cove-nants by the end of this year, even though the loan covenants were "virtually non-existent". Meanwhile, many deals were "under water, just like homeowners" with a gap between the value of the firm and the value of the debt it supports.

He said this would lead to a "series of bankruptcies, further lay-offs and cost-cutting measures" and could well end up costing taxpayers money.

Mr Stern said he was particularly concerned about the fate of so-called mega-deals at the top of the market.

FULL story at link.