Reduced bank lending and higher interest rates are chipping away at a practice that investors have complained about for years: private-equity firms’ use of bridge loans to artificially enhance performance.
Nearly all private-equity firms use the loans, called subscription lines of credit or sub lines, to smooth out the process of buying companies without tapping investors for every deal. But the credit arrangements have become harder to obtain and much more expensive as banks have cut lending and interest rates have climbed.
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This article was written by and originally published on www.wsj.com