Half of European LBOs missing targets -S&P survey

LONDON, Feb 13 (Reuters) - Around half of a group of 36 European companies acquired by private equity firms through leveraged buyouts are lagging behind their earnings and debt targets, a survey by Standard & Poor's showed on Wednesday. Fifty-three percent of the companies -- from the chemicals, industrial equipment, publishing and retail sectors -- are behind on their forecasts for earnings before interest, taxes, depreciation and amortisation (EBITDA), S&P said. Fifty percent have more debt on their balance sheets than they had originally forecast, the agency said.

The data is based mainly on transactions carried out in 2007 and 2006, meaning that it reflects deals done as the leveraged finance market peaked. The companies are not publicly rated but have raised leveraged loans that S&P includes in its private credit estimate portfolio.

"Monitoring the performance of private equity transactions becomes paramount as credit conditions tighten and growth slows, because there is a heightened potential for defaults," S&P said.

European default rates have fallen to historic lows, but nearly all in the market agree that this situation cannot last, with company debt defaults expected to pick up by the end of 2008.

S&P said retail companies were in most danger of breaching leverage and interest cover covenants, and had also put in the worst earnings performance. However, retailers were performing in line with expectations in terms of paying down debt. (Reporting by Richard Barley; Editing by Paul Bolding)