Kohlberg Kravis Roberts & Co. may delay the sale of loans to finance the $26 billion takeover of Greenwood Village-based First
Data Corp. until next week after failing to agree on terms with bankers, people close to the negotiations
said.
KKR, the New York-based leveraged-buyout firm run by Henry Kravis, and banks led by Credit Suisse Group
couldn’t agree yesterday on pricing or how much of the debt lenders will try to sell, said the people,
who declined to be identified because the talks are private.
The First Data sale is the biggest to be attempted since rising U.S. mortgage defaults led to the
highest borrowing costs for LBOs in four years. The planned sale is being watched by bankers and buyout
firms as a gauge for how $320 billion in debt committed for pending buyouts may fare. Banks would have to
hold the loans and bonds if they can’t be sold to investors.
“The pricing environment in the credit markets reflects illiquidity and fear,” said Peter Plaut, an
analyst at Sanno Point Capital Management LLC, a New York-based hedge-fund manager. “If First Data gets
done, it will show a significant vote of confidence.”
KKR spokesman David Lilly declined to comment.
Bruce Corwin, a spokesman in New York for Zurich-based Credit Suisse, didn’t return a call or e-mail
seeking comment. The group of seven banks arranging the loans also includes New York-based Citigroup Inc.
KKR has other deals to finance after First Data, the largest processor
of credit-card payments. The firm and TPG Inc., the private-equity firm in Fort Worth, Texas, agreed in
February to acquire Dallas-based power producer TXU Corp. for $32 billion in the largest U.S. buyout. The
acquisition, which has been approved by shareholders and regulators, is set to close by the end of
December.
Investors Balk Demand for LBO debt has evaporated, with more than 50 deals having been abandoned or
reworked. Investors are balking at debt without covenants, or restrictions, that give them greater power
over a company’s finances.
KKR has yet to agree to terms that would give its banks confidence they can sell the loans to investors
without making the acquisition potentially less profitable, the people said.
The two sides have discussed various structures, including adding a provision that dictates how much
debt First Data can assume relative to earnings, people with knowledge of the negotiations said Sept. 10.
