Friday, September 07, 2007

First Data Deal Crunch Time

by Bill McBride on 9/07/2007 02:24:00 PM

From the WSJ: Crunch Time for KKR, First Data Banks

[Kohlberg Kravis Roberts’] ... and its banks continued to work feverishly on terms for the loans that will fund its $26 billion buyout of First Data. ...

The addition of covenants could be important because the banks — Credit Suisse, Citigroup, Deutsche Bank, Goldman Sachs, HSBC, Lehman Brothers and Merrill Lynch — are committed to funding the deal if investors won’t, and KKR is notorious for taking a hard line with its lenders. The financing consists of $16 billion in loans and $8 billion of junk bonds. The loans were to be so-called covenant-lite, meaning First Data wouldn’t be held to certain performance hurdles.
The Chrysler "pier loans" were probably a significant contributor to the liquidity crisis. If these First Data loans end up on the IB's balance sheets (bridge loans becoming pier loans), this will deepen the liquidity crisis.