Onex: Waiting Patiently To Dive Into the VC Pool

| About: Onex Corporation (ONEXF)

It’s a “very interesting time” for private equity these days, says RBC analyst Nick Morton. And that makes shares of Onex Corp. (OTCPK:ONEXF) [TSE:OCX], with its own private investment team, a good long-term pick.

In a research note, Mr. Morton says that there has been no improvement in the credit markets. lately There is very little liquidity, and pricing on debt has moved up meaningfully. This has made it difficult for those private equity players at the “mega deal” end of the market, who are finding themselves shut out.

However, Onex is finding the situation less difficult, as it often needs $1 billion or less in debt to finance a deal and has tended to finance at lower leverage ratio than the average for private equity.

While Onex has been quiet lately, Mr. Morton says that may soon change, as it has "found an interesting opportunity in the industrial area," which is at a late stage of negotiation and may be announced within the next 60 days, according to Onex CEO Gerry Schwartz

Mr. Morton says Onex’s investment team is “patiently waiting” to make a move with Onex’s own cash, as well as committed cash from its limited partnerships. Its LP#3 has raised C$1.4 billion from third parties so far and the goal is $3.5 billion before the pool closes in early 2009.

Mr. Morton has an “outperform” recommendation on Onex shares, with a target of C$44.

All dollars are US$ unless otherwise indicated.