Underwriters are having trouble selling a $3 billion tranche of some $15 billion in leveraged loans backing Thomas H. Lee Partners LP and Bain Capital LLC's pending $23 billion acquisition of Clear Channel Communications Inc. Sources said that efforts to place the $3 billion slug are being hampered by a weak market, as well as worries over the remaining $12 billion of loans that will eventually have to be sold.
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"The overhang is a big issue," said one banker on the deal.
Underwriters of the debt -- a syndicate of banks including Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Credit Suisse Group, Royal Bank of Scotland Group plc and Wachovia Corp. -- have been trying to price the slug at about 90% of par, but one market source said bids have come back with offers much lower than that, effectively signaling little demand for the loan.
Banks feared this scenario during the contentious negotiations that preceded a final agreement for the Clear Channel buyout. Indeed, the banks pushed hard to gain more favorable terms from Clear Channel's buyers, and the negotiations over drafting a final credit agreement led to lawsuits in New York and Texas. A settlement was reached and the sponsors and company agreed on a reduced price of $23 billion from $25 billion in enterprise value. - Vipal Monga
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