Wednesday, September 12, 2007

First Data Loans Delayed as KKR, Banks Keep Talking, People Say

It looks like the banks and investors have realised that they have gone too far. We can now take this cover "The trouble with private equity" and the men one step further...... Please click at the label to read more about the private equity mess.

Es sieht ganz so aus als wenn Banken und Investoren endlich realisiert haben das Sie heftigst überzogen haben. Ich denken wie können das Cover von "The trouble with private equity" erweitern und davon ausgehen das er sich jetzt auf dem "Abstieg" befindet.... Wenn Ihr mehr "schmutzige" Details zum Thema Private Equity lesen mächtet klickt bitte auf die Labels am Ende des Posts.

Sept. 12 (Bloomberg) -- Kohlberg Kravis Roberts & Co. may delay the sale of loans to fund its $26 billion buyout of First Data Corp. until at least next week after failing to agree on terms with its bankers, people with knowledge of the talks said.

KKR, the New York-based private-equity firm run by Henry Kravis, and banks led by Credit Suisse Group couldn't agree today on pricing or how much of the debt lenders will try to sell, said the people, who asked not to be identified because the negotiations are private.
As recently as April, buyout legend Henry Kravis proclaimed a "golden age" of private equity
The First Data sale is the biggest to be attempted since rising U.S. mortgage defaults triggered the highest leveraged buyout borrowing costs in four years. It's being watched by bankers and buyout firms as a gauge for how $320 billion in debt committed for pending LBOs may fare. The banks would have to hold the loans and bonds if they can't be sold to investors.

``The pricing environment in the credit markets reflects illiquidity and fear,'' said Peter Plaut, an analyst with Sanno Point Capital Management LLC, a New York-based hedge-fund manager. ``If First Data gets done, it will show a significant vote of confidence.''

KKR has other deals to finance after Greenwood Village, Colorado-based First Data, the largest processor of credit-card payments. The firm and TPG Inc. agreed in February to buy Dallas-based power producer TXU for $32 billion in the largest U.S. buyout. The acquisition, which has been approved by shareholders and regulators, is set to close by the end of December.

> If you read the details from the TXU deal it is no wonder that the banks are having trouble to unload this junk.

> Wenn man sich die Details des TXU Deals durchliest ist es nicht weiter verwunderlich das keiner diese waghalsigen Kredite aufnehmen möchte.

Investors Balk
Demand for LBO debt has evaporated. After buying a record $754 billion of leveraged loans this year, investors are balking at debt without covenants, or restrictions, that give them greater power over a company's finances. More than 50 deals have been abandoned or reworked.

KKR has yet to agree to terms that would give its banks confidence they can sell the loans to investors without making the acquisition potentially less profitable, the people said.

The two sides have discussed various structures, including adding a provision that dictates how much debt First Data can assume relative to earnings, people with knowledge of the negotiations said Sept. 10.

Marketwatch reports First Data LBO may be costly for banks involved
Even if the banks manage to sell all the loans, they will probably have to offer them at a discount to entice investors.

If the First Data loans are sold at 94 cents on the dollar, that would leave the banks with a loss of between three and four cents on the dollar. On a $14 billion loan deal, that translates to a loss of $420 million to $560 million.

Citigroup is particularly exposed to such problems, according to analysts.

Quote Prince CEO Citigroup just a few weeks ago The $1 Billion Break Up Fee & An Ignorant And Deaf CEO

“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".

The bank is a lead underwriter on five of the six largest leveraged loan pending, including debt to support the LBOs of BCE Inc. , TXU Corp. and Alltel Corp. according to Banc of America Securities. That's more than $70 billion worth of loans

> But they are not alone.....See this excellent table The Banks Behind The Biggest Buyouts

> Immerhin sind Sie nicht alleine...Hier eine erstklassige Übersicht The Banks Behind The Biggest Buyouts

Citigroup is also lead underwriter on three of the five largest pending high-yield bond deals, worth more than $20 billion, Banc of America Securities noted.

First Data is one of the last so-called covenant-lite deals. These types of loans, which give companies more leeway and creditors less power, have fallen out of favor in recent months.

Over the weekend, KKR agreed to add one covenant to the First Data debt, the Wall Street Journal reported on Tuesday. The company must now maintain a certain ratio of earnings, before interest, depreciation, tax and amortization (EBITDA) to senior debt, the newspaper explained.

However, that's not much of a concession, especially considering the LBO is already highly leveraged, KDP's Lee said.

This is just in from the FT Talks to start on TXU $45bn financing
Negotiations over the terms of the financing package for the $45bn buy-out of TXU, the Texas-based energy group, are set to begin after the purchase by US private equity groups KKR and TPG received final regulatory approval earlier than expected.

The banks funding the TXU takeover - Citigroup, Goldman Sachs, JPMorgan, Lehman Brothers and Morgan Stanley - are expected to push for the inclusion of covenants in $37bn of loan financing and higher interest payments to make the debt more palatable to investors. But the buy-out groups will be reluctant to make any concessions that could hurt returns. The bond portion, worth about $8bn, would be sold after the loans.
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1 Comments:

Blogger jmf said...


Goldman Global Alpha Fund Fell 22% in August, Most in Any Month


Goldman Sachs Group Inc.'s Global Alpha hedge fund fell 22.5 percent in August, its biggest monthly decline, on losses from currency and stock trades, according to an update sent to investors.

The fund, managed by Mark Carhart and Raymond Iwanowski, dropped by a third in 2007 and 44 percent from its March 2006 peak. Investors notified New York-based Goldman last month that they plan to withdraw $1.6 billion from the fund, or almost a fifth of its assets as of July 31.

The month's biggest loss was an 8.9 percent decline in currencies, mostly from the fund's decision to sell Japanese yen and buy Australian dollars. The so-called carry trade unraveled when the Australian dollar fell 6 percent against the yen in August. The managers lost 4.7 percent in equities, including stocks in the U.S., Norway and Finland.

LOL!

11:56 PM  

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