PRIVATE-EQUITY BOSS Damon Buffini’s effort to steer Permira out of the recession hit a fresh setback this weekend after restructuring experts were called in at one of its largest investments.

The revelation comes at a difficult time for Buffini. The private-equity giant’s chairman became the reluctant face of the industry during the boom — and a lightning rod for unions and politicians who criticised executives for enriching themselves by loading debt on the firms they owned and slashing jobs. The recession burst the bubble and Permira has now written off some top-of-the-market deals as worthless.

The latest is Borsodchem, a chemicals company whose business collapsed due to the struggles of its automotive and construction customers. Permira has brought in Houlihan Lokey to restructure the ¤1.15 billion (£1 billion) loan that it used to buy the company two years ago. It is understood that the firm has written its equity stake down to zero.

Last month the cash-strapped Hungarian state pledged to step in with an aid package to keep Borsodchem from laying off 550 employees, or 20% of its workforce.

Permira has also written down other big deals. Its stake in bingo-halls operator Gala Coral is worthless, while the values of Valentino, owner of Hugo Boss, and ProSieben, the German TV broadcaster, have plummeted. The fashion chain New Look is one of the investments that are performing well.

In its annual report later this month, Permira will reveal that it returned ¤2.3 billion to investors last year and will argue that most of its portfolio is holding up well, but concerns about the health of several of its biggest bets remain. Its struggles are indicative of a violent contraction in the private-equity industry that has laid low several of the most prominent firms, including Candover, 3i, Apollo and KKR.

Permira’s results are not expected to be as dire as those revealed recently by SVG Capital, the single-biggest investor in Permira’s buyout funds. Nicholas Ferguson, chairman of SVG, acknowledged in the company’s annual accounts last week that the value of its assets — 80% of which are tied up in Permira funds — had declined by two-thirds and that last year had been the company’s most difficult to date.

SVG is expected to reduce its exposure to Permira significantly, while Buffini, now a non-executive director, will step down from its board.

Permira’s biggest problems are mainly confined to the ¤11 billion megafund it raised in 2006 — reduced to ¤9.6 billion after some investors were allowed to downgrade their commitments in December.

One of its most troubled assets is Freescale Semiconductor. Permira was one of four buyout firms that paid $17.6 billion (£12 billion) for the chip maker in 2006. Last month banks agreed to forgive some of its debt but the outlook remains unclear.SVG has written down its investment in the business by 85%.

Permira is not the only buyout firm with issues. Candover, which owns bingo company Gala Coral and yacht-maker Ferretti, is up for sale. Harbour capital, a London-based “vulture” fund, is rumoured to be among those bidding.

Foxtons, the estate agency bought by BC Partners, is in talks with its banks about a possible debt for equity swap, which could see its lending banks write off as much as £90m of their original investment.

CVC, meanwhile, has posted a 25% drop in profits to £1.4m.

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