NEW YORK—Kohlberg Kravis Roberts & Co. agreed in principle to make concessions being sought by banks arranging $16 billion in financing for its purchase of Colorado-based payment processor First Data Corp., a person familiar with the talks said Monday.
The private-equity firm has been forced by the banks to come up with stronger terms to protect investors in case First Data has financial problems, said the person, who spoke on condition of anonymity because they were not authorized to be quoted by name.
The discussions comes as a tightening credit environment makes it harder for private equity firms to obtain money used to fund leverage buyouts.
Packaging loan offerings with extra terms makes it easier for the banks to sell the debt to investors. Lately, investors have been balking at large loan packages as growing concerns about the economy and credit markets decrease their appetite for risk.
Credit Suisse and Citigroup Inc. are lead underwriters on First Data’s acquisition of First Data.
Spokesmen for KKR, Citigroup, and First Data declined to comment. Credit Suisse could not be reached for comment.
KKR has agreed to a loan covenant that places performance criteria on First Data’s debt, according to The Wall Street Journal. KKR has agreed to maintain a certain level of earnings before interest, depreciation, taxes and amortization in relation to the senior debt, said the report, citing unnamed sources.
The buyout of Greenwood Village, Colo.-based First Data is being closely watched by Wall Street as a litmus test to determine if future deals can be completed. There are some $400 billion worth of private equity deals still waiting for financing, according to data provided by Dealogic.
Earlier this year, a number of banks forced Cerberus Capital Management to put up more capital for its acquisition of Chrysler Group. And, with less money being borrowed, the banks agreed to shoulder some of the debt for the time being.
