Posts with tag CLOs
Posted Sep 10th 2007 2:31PM by Peter Cohan
Filed under: KKR, Financials and analyticals
The
Wall Street Journal [subscription required] reports that
Kohlberg, Kravis and Roberts (KKR) is negotiating with banks to lend it $24 billion for its $26.4 billion deal to buy payment processor,
First Data Corp. (NYSE:
FDC). What's at stake here is whether last month's pause in the
private equity fueled takeover market is temporarily on hold or dead for a decade.
There is a $400 billion backlog of such debt deals in the pipeline. Prior to the August pause, banks had no trouble selling the debt to hedge funds and others. But the terms -- or covenants -- of that debt were so loose that the banks were creating loans that demanded very little in the way of performance.
These so-called covenant-lite loans may soon become a thing of the past. If the Journal's reporting is correct, KKR may agree to a covenant requiring it to maintain a minimum level of earnings before interest taxes depreciation and amortization (EBITDA). Such terms used to be common in debt offerings, but the fact that there is even any debate about it, indicates how much covenant-lite debt risk is currently out in the market for which debt buyers have no protection at all.
Continue reading KKR negotiates First Data(FDC) deal with banks
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