| |||||||||||
| |||||||||||
It is hard to believe the report from AFX News/Thomson Financial's London bureau Tuesday morning that the banks financing the $45 billion buyout of Texas utility TXU Corp., led by Citigroup Inc., might pull out and pay the $1 billion breakup fee that the buyers would owe TXU if the deal doesn't close. If it were true, it would be momentous. The TXU LBO is the largest ever proposed in the U.S., and second only to the $48.5 billion pending deal for Canadian telecom BCE Inc. If it collapsed, that would cast a pall over all the other big pending take-privates. The banks, which include Lehman Brothers Inc., J.P. Morgan Chase & Co., Goldman, Sachs & Co. and Morgan Stanley, committed to provide $37.5 billion of debt for the buyout by Kohlberg Kravis Roberts & Co., TPG and Goldman Sachs Capital Partners. AFX quoted a source saying that the breakup fee would be cheaper than the hit the banks could take if they could not syndicate the debt at face value. Loans and bonds from recent LBOs are trading up to 10% under their face value, AFX noted. One source connected to one of the lenders told The Deal the report was absolutely false, and risk arbitrageurs said Tuesday they did not give the story credence. Indeed, it seems unlikely the banks would be considering a move seriously now because the deal still need shareholder and regulatory approval and therefore won't close for months. By that time the debt markets may have stabilized. Why would the banks damage their reputations by reneging on their commitments now and guarantee themselves at least a $1 billion loss on the deal when the syndication might go smoothly in a couple of months? Moreover, of the big LBO financings in the pipeline, TXU is considered one of the strongest credits, and one of the least likely to run into trouble. —John E. Morris with David Carey and Scott Stuart See story from AFX News via CNNmoney Tags: TXU, private+equity, deals, private-equity, mergers CategoriesPrivate capital video
Categories
Blog roll
Archives
| |||||||||||
|
|
|
|
|
