Is it the start of the collapse of private equity and LBO funds?

It's hard to predict the fall of private equity and LBO funds because they are very opaque and secretive and the disappearance of mark-to-market made things even more fuzzy. But, one thing is sure: most LBO funds are going to default on their debt and bring down the lenders with them. They made most of their acquisitions in 2006 and 2007, at the very peak of the market.

Unsustainable debt in addition to falling asset prices is a double wamy: how to pay when you don't have the cash? Even if you had the cash, why would you pay if your debt is twice as much as the value of your assets?

Here's quite a telling example, from Bloomberg:

Aug. 6 (Bloomberg) -- KKR & Co. and Bain Capital LLC sold shares of NXP Semiconductors NV in a $476 million initial public offering for 46 percent less than they paid to take control of the company at the height of the credit-market bubble.

NXP, acquired by KKR, Bain and three other private equity firms in a $9.4 billion leveraged buyout, sold 34 million shares at $14 each yesterday, the company said in a statement. Owners sought $18 to $21 per share in the IPO after paying an average of $26.07 a share for the Eindhoven, Netherlands-based unit of Royal Philips Electronics NV in 2006.

Buyout firms are selling some of their investments at a discount three years after debt-fueled acquisitions peaked just as credit markets started to freeze. NXP, which makes semiconductors used in everything from radars to hearing aids and pachinko machines, reported combined losses of $5.5 billion since the takeover. KKR, the leveraged buyout firm founded by billionaire investors Henry Kravis and George Roberts, said in May its stake in NXP was worth 40 cents on the dollar.