Monday, August 20, 2007

First Data LBO may get banks into trouble

Very interesting article in Investment news here that outlines that the banks that sought to assist private equity firm KKO with the leveraged buy-out of First Data, may end up footing the bill themselves, due the current market developments:
When the $29 billion deal for credit card processor First Data Corp. was announced in April, it looked like another coup for New York-based buyout firm KKR & Co. LP and the banks, which stood to collect millions in fees from selling mountains of junk bonds and exotic instruments.

The trouble is that demand for speculative debt has dried up.

Even in the spring, “this deal looked like a bit of a stretch,” said Chris Donnelly, an analyst at Standard & Poor’s Leveraged Commentary and Data in New York. Now, he said, “unless the market changes drastically, the only question is how much money the arrangers will lose on it.”