Wednesday, August 01, 2007

The $1 Billion Break Up Fee & An Ignorant And Deaf CEO

If you read the details from the deal it is no wonder that the banks are having trouble to unload this junk. But you have to feel lots of Schadenfreude when you read comments taken from Mish´s Top Call ( almost perfect call Mish!) from the Citigroup CEO Chuck Prince just a month ago like this

Wenn man sich die Details des TXU Deals durchliest ist es nicht weiter verwunderlich das keiner diese waghalsigen Kredite aufnehmen möchte. Man kann aber gerade nichts anderes als die pure Schadenfreude empfinden wenn man sich den Kommentar des CEO der Citigroup Chuck Prince vom 10. Juli vor Augen führt


“When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing".


Thanks to Minyanville

Billion Dollar Breakup
Banks led by Citigroup (C) are considering whether they should pay a $1 billion break-up fee in order to get out of a deal to buy Texas Utilities (TXU) Thomson Financial is reporting.

  • Why the cold feet?

  • According to Thomson the lenders want to avoid being stuck with $37.2 billion in
    debt to fund the purchase of TXU by Kohlberg Kravis Roberts & Co. and TPG.
  • Goldman Sachs (GS), JPMorgan Chase (JPM), Lehman (LEH) and Morgan Stanley (MS) had also committed to provide the debt financing for the acquisition.
  • Yikes! But $1 billion just to get out of a financing arrangement? Pretty steep, no?
  • Yes, it is pretty steep. But, according to Thomson, apparently not as steep as the current losses of upwards of 10% on traded loans and bonds of recent buyouts.
  • According to First Data (FDC), there's an estimated $300 billion of total debt for buyouts that still need to be funded.
  • Among the deals still pending, Blackstone's (BX) leveraged buyout of Hilton Hotels (HLT).
    A separate article by Bloomberg this morning said banks led by Bank of America (BAC) have agreed to provide as much as $21 billion of debt financing to fund the buyout... at least for now.

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3 Comments:

Blogger jmf said...

Let´s start the "Blame Game"


Subprime Defaults Blamed for Corporate America Earning Setbacks

3:50 AM  
Anonymous Anonymous said...

Ed in Texas

Favorite sayings from Schadenfeude Man:
(1) Wow! That's gotta hurt.
(2) No, my attorney says I shouldn't get involved in these things.
(3) So, how's that working out for you then?

10:29 AM  
Blogger Edgar said...

I would like to loan them billion$ on terms favorable to them. If they pay me back I get 6%, woohoo!

8:20 PM  

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