One third of companies controlled by UK mid-market private equity groups may default on their debts, a leading private equity chief has warned.

Alchemy head Jon Moulton told a conference at the London School of Economics that private equity groups which had invested badly could disappear altogether.

He said: “The recession will kill a lot of the firms that have made poor investments and are punished by investors.

The Financial Times reported Moulton’s comments that senior debt in 10 of Europe’s biggest private equity portfolio companies was trading at below 60 per cent of par value and equity in such deals had “little more than option value.”

He observed that Alliance Boots’ senior debt has been trading at less than 60 per cent of par value and that “it is impossible to attribute any real value to that equity”.

The£11 billion acquisition of Alliance Boots by Stefano Pessina and KKR in 2007 was Europe’s biggest private equity deal.

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