Friday, August 10, 2007

First Data Buyout Hits Snag?

Aug. 10 Bloomberg reports that the global stock-market decline has hurt shares of buyout target First Data Corp., prompting speculation the deal may go back to the negotiating table.

First Data, which agreed to be taken private by New York-based Kohlberg Kravis Roberts (KKR) in April, dropped as much as 6.1 percent to $29.13 and has decreased 7.4 percent since July 10. KKR agreed to pay $34 a share.

From another source, on Wednesday a story from Dow Jones Newswires reported that the financing for the $26 billion buyout of First Data still contains $14 billion of loans that are light on protection for creditors, and no such high-yield loans are moving right now. That means that unless things change dramatically between now and September, the banks arranging the debt sale are going to be forced to eat the paper.

Those banks are Citigroup, Credit Suisse Group, Deutsche Bank, HSBC, Lehman Brothers Holding, Goldman Sachs Group and Merrill Lynch. According to the Newswires piece, comparable debt now is trading in the market at about 95 cents on the dollar, which could mean 5% in losses to be shared by the banks, or roughly $700 million.

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