LBO Firms Falter in Selling their Debt

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	LBO Firms Falter in Selling their Debt

Forbes Business

7-20-2007 10:56 AM

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tags:

lbos, kohlberg kravis roberts, buyouts, private equity

Forbes Business says:

The deals got bigger, as did the debt needed to pull them off, and now there are no buyers. Banks are getting stuck with the loans, and that probably means the buyout boom will be quieting down. -- Liz Moyer

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<div style="margin: 12px 0px; font-family: arial; color: #333333; background: #ffffff; border: solid 4px #e5e5e5; width: 100%; clear: left;"><div class="CM_CTB_Content_Wrap" style="margin: 0px; padding: 0px;background-color: #ffffff;"><div style="border-bottom: solid 1px #dcdcdc; white-space: nowrap; margin-bottom: 8px; background-color: #eeeeee ;background-image: url(http://clipmarks.com/images/source-bg.gif); background-repeat: repeat-x; height: 24px; line-height: 24px; vertical-align: middle; padding-bottom: 4px; color: #666666; font-size: 10px;" ><a href="http://clipmarks.com/clip-to-blog/" title="see clips that are hot right now"><img src="http://content.clipmarks.com/blog_embed/6b555420-dc96-42e4-a912-6b5fa18bc79f/9883858A-A0C1-4AB5-A616-09B953CB2A4D/" alt="" width="19" height="19" border="0" style="vertical-align: middle; margin: 0px 4px; display: inline; border: none; float:none;" /></a>clipped from <a title="http://www.breakingviews.com/freestory.aspx?e=c0i2fiY37rG" href="http://www.breakingviews.com/freestory.aspx?e=c0i2fiY37rG" style="font-size: 11px;">www.breakingviews.com</a></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.breakingviews.com/freestory.aspx?e=c0i2fiY37rG"><DIV>Since the beginning of the year, KKR has announced transactions worth over $120bn, Dealogic says. Over that time, the debt market has changed dramatically. Debt investors are demanding higher interest rates and stricter covenants. Some deals have had to be pulled or restructured. 
</DIV></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.breakingviews.com/freestory.aspx?e=c0i2fiY37rG"><DIV>These include a number of KKR's own. Its underwriters postponed the financing package for its buyout of US Foodservice because investors couldn't get comfortable with the deal. And KKR has agreed to more favourable terms in its Dollar General and Alliance Boots packages. This week, it pulled its refinancing for Maxeda. 
</DIV></blockquote><div style="height: 2px; font-size: 2px; background: #dcdcdc; border-bottom: solid 1px #f5f5f5; margin: 2px 4px;"></div><blockquote style="text-align: left; padding: 0px 8px; margin: 4px 0px 8px 0px; background: transparent; border: none;" cite="http://www.breakingviews.com/freestory.aspx?e=c0i2fiY37rG">Every additional 50 basis points that a private equity firm must pay on a buyout debt package reduces the deal's internal rate of return by as much as 1.5 percentage points, according to Lehman Brothers. If a severe market correction occurred, say, pushing interest costs up by 2.5%, a fund's returns could be cut by nearly a third.</blockquote></div><div style="margin: 0px 6px 6px 4px;"><table style="font-size: 11px;border-spacing: 0px;padding: 0px;" cellpadding="0" cellspacing="0" width="100%"><tr><td style="background:transparent;border-width:0px;padding:0px;">&nbsp;</td><td align="right" style="background:transparent;border-width:0px;padding:0px;width:107px" width="107"><a href="http://clipmarks.com/share/9883858A-A0C1-4AB5-A616-09B953CB2A4D/blog/" title="blog or email this clip"><img src="http://content9.clipmarks.com/images/c2b-foot.png" border="0" alt="blog it" width="107" height="17" style="border-width:0px;padding:0px;margin:0px;" /></a></td></tr></table></div></div>

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