According to the latest issue of Barron's, it looks like buyout loans could be headed for trouble.

Well, that's not scaring investment maestro, Warren Buffett. Actually, he's getting interested in the sector. A report from Fortune indicates that Buffett, through Berkshire Hathaway, has purchased more than $2 billion in the debt of TXU, the massive energy provider.

The TXU deal, which was priced at $45 billion, was spearheaded by KKR and TPG, and the deal closed in October. Of this, about $26 billion was composed of debt financing.

So, is Buffett's move a signal that the credit crunch is less than fatal? Not necessarily. Keep in mind that he's a long-term investor -- and definitely sees some value in the TXU bonds. After all, the company has a dominant position in the Texas market. Besides, Buffett likes utilities.

Nonetheless, it's still good news. Wall Street needs to unload tons of buyout debt for existing deals (especially for risky bridge loans) -- and, so long as the price is right, there are buyers coming to the table.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates Dealprofiles.com.

MAJOR PAPERS:

• Alain Dassas has been named CFO of Nissan Motor Company (NASDAQ: NSANY), filing a position that has remained open for four years, reported the Wall Street Journal. Dassas runs the Formula One race car team at Renault, which has a 44% stake in Nissan.

OTHER PAPERS:

• Goldman Sachs Group (NYSE: GS), Morgan Stanley (NYSE: MS), Citigroup Inc (NYSE: C), Lehman Brothers Holdings (NYSE: LEH) and JP Morgan Chase and Company (NYSE: JPM), The banks involved in the underwriting of the TXU Corporation (NYSE: TXU) buyout by Kohlberg Kravis Roberts and TPG, have offered to pay the $1B breakup free to convince the private equity buyers to back out, according to the U.K. Times.
• GlaxoSmithKline (NYSE: GSK) is currently looking for someone to succeed CEO Jean-Pierre Garnier, who will retire next May, and investors are thought to want a CEO that will 'radically overhaul' the company and possible break it up, reported the Guardian.
• The Seattle Times reported that Boeing Company (NYSE: BA) is expected to announce that the first flight of its 787 Dreamliner jet will be delayed at least until late October, according to an inside source.

WEBSITES:

• Herb Greenberg noted in his MarketWatch blog yesterday that International Rectifier Corporation (NYSE: IRF) disclosed on Friday after the market close how it was committing fraud by having a subsidiary hide products already booked as revenue in "off-books warehouses."

For the past few years, things have been nearly perfect for the private equity world. Credit was cheap and public companies were certainly willing to go private.

But, of course, things are much different now. In fact, there is some doubt that mega deals -- such as for TXU Corp. (NYSE: TXU) and SLM Corp. (NYSE: SLM) -- may not get done because of the tough credit environment.

However, can buyers legally walk from a deal?

Not very easily, actually. After all, when a buyer signs a merger agreement, it's an enforceable contract. And, if it is breached, the consequences can be severe. In fact, in some cases, the buyer may be required to complete the deal. The New York Times looks at this issue in depth today. (registration required).

Whenever I hear some market pundit who sounds like they've got all of the answers behind the current crisis in the world's financial markets, the classic Frank Zappa line "Look here brother, who you jivin' with your cozmic debris" echos in my head. Zappa's point that people should avoid simple answers to complicated questions is especially relevant today.

The world's major central banks today added more than $137 billion into the banking system, keeping today's loss in the Dow Jones Industrial Average to 31.14 points following a turbulent trading session. This seems like a temporary, albeit expensive, Band-Aid on a very large wound. The bad news is far from over.

For example, Goldman Sachs Group Inc.'s (NYSE: GS) Alpha Fund may be the next hedge fund to implode. So far this year, it has dropped 26%, according to Bloomberg News. The Wall Street Journal (subscription required) points out that many hedge funds will see increased redemptions during August. Bloomberg also reported that many of the big buyout deals that have been announced over the past few months including TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC) will have to be renegotiated.

Are there bargains to be had? Of course, markets act on irrational fear and irrational exuberance. But be careful, sometimes stocks are cheap for very good reason, such as exposure to subprime mortgage securities. It will pay to be selective in your bargain hunting.

Some investors also might want to consider shifting some of their assets into more conservative investments such as municipal bonds, utility stocks such as Exelon Corp. (NYSE: EXC) and defense companies such as Lockheed Martin Corp. (NYSE: LMT).

Don't overdo it, though. Over time, the market will right itself.

Meanwhile, people need to take a deep breath and exhale.

Ted Allrich is the founder of The Online Investor and author of the just released book: Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he'll offer advice to investors who are just getting started.

It's a good time to be a little defensive in the stock market, to look at stocks with a history of increasing earnings as well as dividends. While these don't tend to have a catalyst that will vault them into the stratosphere the way a tech or biotech stock can, they give a lot of comfort when there's so much turmoil in the market.

The first thing to think about when you're on defense is the shape of the economy and the kinds of items consumers always buy, no matter what the economy is doing. Consumer spending makes up about 2/3 of the U.S. economy. What the consumer does matters. Right now many consumers are having trouble paying their mortgages. Housing prices are going down in many areas of the country. Large mortgage lenders such as Countrywide Financial Corp. (NYSE: CFC) and IndyMac Bancorp. (NYSE: IMB) k are having problems with their portfolios. Defensive investors won't be looking into the mortgage lending stocks for comfort.

More likely they'll be looking at companies that supply things that people must buy, things like drugs, toothpaste, gasoline, toilet paper (also known as bathroom stationery), soap, food, utilities, etc. These are the basics. They're supplied by many different companies, and many of those companies are improving, even in these difficult times. Here are just a few ideas (not recommendations for investing, but recommendations for more investigating):

It's been a long process, but there's finally a deal. BCE (NYSE: BCE), which is the largest telecom company in Canada, has agreed to a $48.82 billion deal. The buyers include the Ontario Teachers Pension Plan, Providence Equity Partners, and Madison Dearborn Partners.

And, yes, it's the biggest buyout in Canada's history. It's even bigger than the TXU (NYSE: TXU) deal.

The transaction involved several other potential suitors, such as KKR and Cerberus Capital.

Because of increased competition and slower growth, BCE was ripe for a buyout. It also helps that the company has juicy cash flows.

So, by being a private company, BCE will have more leeway in making some key operational changes (such as layoffs and spin-offs).

The biggest winners are BCE's shareholders. After all, since late March, the shares have surged about 40%.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Every week, there seems to be yet another mega M&A deal. It's not just in the US but across the world. Yes, everyone is going ga-ga for M&A.

And, according to a recent report from Bloomberg, the stats are off the charts. So far this year, M&A volume has surged 60% to $2 trillion. Keep in mind that the same period last year was also a record.

Of course, a big help is from the private equity folks. Some of the deals include the buyouts of TXU (NYSE: TXU) and First Data Corp. (NYSE: FDC).

So who is the leader in the space right now? It's the pioneer of leveraged buyouts, KKR. The firm has racked up about $118 billion in deals.

There has also been a surge in strategic buyouts. For example, Thomson is buying Reuters (NASDAQ: RTRSY), HeidelbergCement is making a bid for Hanson Plc, and Barclays (NYSE: BCS) is trying to acquire ABN Amro Holding NV.

Although, as we go into the summer months, things will probably slow down. But, I'm sure things will rev up quickly by the last part of the year.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Back in late February, I wrote a piece on BloggingStocks.com about unusual trading in TXU's (NYSE: TXU) stock options before the announcement of its leveraged buyout.

Well, as should probably not be a surprise, it looks like there was foul play. This is according to a story in The Wall Street Journal (subscription required).

The SEC has brought charges for leaking confidential information on the TXU deal. The unlucky target? His name is Hafiz Naseem and he was hired as an investment banker at Credit Suisse (NYSE: CS) in March 2006. Apparently, he provided the information to a Pakistani banker.

And, according to the SEC, it looks like more charges will be brought (so I think Naseem was talking it up).

All of this seems inevitable. With the boom in buyouts, it gets very temping to make some extra millions. Hey, isn't the SEC too busy to worry about such things?

Right now, it looks like the SEC is getting very busy and we may have a new scandal brewing.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

I can understand why CEOs complain about federal disclosure laws. It can be very revealing.

Take a look at the latest filing from TXU (NYSE: TXU), which is currently involved in a $32 billion leveraged buyout.

The company's CEO, C. John Wilder, certainly has a parachute that is pure gold. If the buyout deal gets done, he stands to walk away with $279.3 million. It sure beats the gold watch. In fact, I think he'll soon be able to buy a nice island (and no longer need to deal with those pesky federal regulations).

Okay, in the world of private equity, this is normal stuff, but in the world of utilities, this may not be so normal – or acceptable.

TXU's buyers – KKR and the Texas Pacific Group (TPG) – have been working pretty hard to keep this deal on track. But, with the CEO's compensation disclosure, I think things may get much tougher.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Since December, utility stocks have been star performers, aided by takeover speculation, optimism about the economy, and momentum-based buying. So far this year, the S&P 500 Utilties sector (which has an equivalent exchange-traded fund, or ETF (AMEX: XLU)) has gained 13.3% and has outperformed the S&P 500 index by almost nine percentage points.

At this point, however, several factors suggest the run-up may be overdone and the shares due for at least a short-term pullback.

For one thing, May is a seasonably weak month for utilities, with the sector wracking up a median loss of 1.8% relative to the broad benchmark over the past 15 years.

In addition, recent economic data suggest that the U.S. economy is slowing at a faster pace than many had thought and is likely headed into recession. This will almost certainly have a negative impact on revenues from power generation as well as efforts to boost rates.

There seems to be no bounds on the mega amounts that private equity firms are willing to pay. Just some of the deals include the $29 billion purchase of First Data (NYSE: FDS) and the $45 billion buyout of TXU (NYSE: TXU).

So how do the pros come up with these valuations? Well, I had a chance to talk to Michael Wolfe, who is with Fesnak and Associates, LLP. He is not only a CPA but also has the ABV (Accredited in Business Valuation) and CVA (Certified Valuation Analyst) designations.

In his practice, Wolfe conducts valuations for a variety of private equity firms. "There are different approaches to valuing a buyout," he said. "But it really boils down to buying a stream of future cash flows."

To this end, Wolfe uses the discounted cash flow (DCF) method. This involves a projection of cash flows -- and even accounting for different scenarios.

There also needs to be a discount rate, which is an estimate of the risk of achieving the cash flows. "With the large influx of money into private equity firms," said Wolfe, "we are seeing discount rates fall in general. I'm not sure this means the actual risk has gone down. Only time will tell. So going forward, it will certainly be tougher for private equity firms to get the kinds of returns they have been getting over the years."

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

The rumor is that Carlyle is paying MBA graduate students salaries of $350K+. Given the action in the space -- with billions going to buy mega companies like TXU Corp. (NYSE: TXU) and First Data Corp. (NYSE: FDC) -- I'm not surprised.

I guess the question is: What do private equity firms look for in an MBA?

I had a chance to talk to Charley Polachi, who is a seasoned recruiter and founding partner of Polachi & Company. He has conducted a variety of searches for CEOs, partners and board members for private equity clients.

Polachi says that recruiting for the private equity world is changing quickly. "The traditional model was that a new recruit would be mentored for seven years or so," he said. "This transferred the knowledge and the protégé would eventually become a partner. It was essentially an apprenticeship."

Kohlberg Kravis Roberts & Co., reportedly has BCE Inc. (NYSE:BCE), the owner of Bell Canada, in its sights.

A deal for the telecom company would be worth about CAD$30 billion (over USD$25 billion), making it the largest acquisition in Canadian history and one of the largest buyouts ever, according to the Globe and Mail newspaper. KKR is looking for Canadian partners such as the Ontario Teachers' Fund since foreign firms are prohibited from owning more than 46% of a telecom company's voting shares.

Shares of BCE were up 12% pre-market trading. They have dropped about 4% this year.

KKR already has its hands full:

The New York-based buyout firm is part of the $45 billion TXU Corp. (NYSE: TXU) deal, the largest buyout ever. KKR also is among the companies in the hunt for Australian retailer Coles Group Ltd. Last month, it agreed to buy Dollar General Stores Corp. (NYSE: DG).

Apparently, there's no limit to the number of multi-billion acquisitions that KKR can juggle at the same time.

Goldman Sachs Group Inc. (NYSE:GS) is planning to raise $19 billion to $20 billion for the largest corporate buyout fund ever.

This isn't a total shock. As Reuters points out, rival bankers have argued that Goldman was excluded from the Blackstone Group IPO because it's viewed as too much of a competitor. Goldman Chief Executive Lloyd Blankfein disputes this characterization.

Last month, Goldman joined forces with Kohlberg Kravis Roberts & Co. and Texas Pacific Group for the $45 billion TXU buyout, the largest ever.

Buyout funds are surging in popularity because of the growing demand by large investors for alternatives to stocks and bonds

But this is far from a sure thing.

``They have been leaders in identifying new trends and clearly this is where they feel their profit margins have the most growth opportunity,'' said Financial Advisory Service portfolio manager Douglas Ciocca told Bloomberg News. ``But this is risky if it decreases their liquidity.''

It will be interesting to watch to see how private equity firms and rivals on Wall Street react to Goldman's move.

Meanwhile, I bet hotel rooms are booking up fast near Goldman's headquarters in New York from companies both large and small eager to be acquired.

Texas Pacific Group's (TPG) David Bonderman and KKR's Henry Kravis got a civic lesson yesterday. These buyout wizards met with the Texas House Committee on Regulated Industries on the issue of TXU (NYSE:TXU). Four proposed board members of TXU were there too: Don Evans, former U.S. Secretary of Commerce; James Huffines, Chairman of Plains National Bank Central Region; Ambassador Lyndon Olson, a former member of the Texas Legislature; and William Reilly, former Administrator of the U.S. Environmental Protection Agency.

The message: don't pass legislation that would require a regulatory review of the mega deal.

Hey, but don't politicians like to intervene -- especially when it concerns what consumers may ultimately pay?

Definitely. And it does look like the legislation is getting traction.

This does not mean the deal is doomed. Basically, it looks like TPG and KKR will need to make even more concessions, such as selling off assets and not piling debt on the regulated business units. TXU will also need to report its quarterly filings to the SEC.

The big problem is that the legislation will probably delay the process even more. And that's why TXU's stock has been lagging.

While the buyout offer is $69.25, TXU's stock is currently trading at $63.90.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.