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Thursday, August 23, 2007

Home Depot Close to Accepting Less for Unit

by Calculated Risk on 8/23/2007 10:12:00 PM

From WSJ: Home Depot Is Close to Accepting $1.2 Billion Less for Wholesale Unit

Home Depot was Thursday night close to accepting about $1.2 billion less for the sale of its wholesale distribution business to three private-equity firms ... But there were still substantial doubts about whether the deal will actually close before a Thursday deadline, as three major banks continued to balk over the financing.

The situation was becoming increasingly ugly, with some of the most senior figures on Wall Street trying to manage their exposure to a deal beset by twin crises in both the housing and credit markets. The banks -- J.P. Morgan Chase, Lehman Brothers Holdings Inc. and Merrill Lynch & Co. Inc. were last night preparing for the possibility of lawsuits over the matter.
Pinched by the current credit crisis, the banks are toughening their stance against the private-equity firms. With a backlog of some $300 billion of U.S. private-equity deals still to be funded, the banks are now facing significant writedowns on their balance sheets. That's why they are weighing how to extract themselves from as many buyout transactions as possible.
How many pier loans can these IBs carry? Most likely some of these deals will collapse. This is quite a haircut for Home Depot, and it is still not a done deal.