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United Rentals is likely to see an expedited Delaware court ruling, possibly by December or January, in its litigation pursuit against RAM, dealReporter has learnt.
Whereas Sallie Mae/JC Flowers is not set to be in court until July to argue over a Material Adverse Effect Clause (MAC), URI envisions an earlier court decision in its pursuit of specific performance, as the drop dead date on financing for the deal is 22 January.
There have been no pricing renegotiations of any sort between United Rentals and Cerberus’ shell company RAM since 14 November when media reports broke news of deal unrest, it is understood.
According to the complaint filed in Delaware by URI, in the two days following the news, RAM offered the target a “substantially reduced price.” It is understood RAM does not see a price too distant from mid USD 20s per share as a feasible investment for URI with one starting at an even lower price to allow room for negotiation.
Both sides agree while no renegotiations exist at this point, there is always the prospect of settlement at some point. Although URI is confident in its ability to obtain a favorable ruling, it would need a compelling new offer from RAM to consider litigation withdrawal, it is understood.
The banks set to provide financing on URI are Credit Suisse, Lehman Brothers, Morgan Stanley, and Bank of America. Sources familiar with the situation said that all banks are hopeful for a scrapped deal because in the event RAM renegotiates a new price or is forced to close, it is likely those banks will have to bridge the transaction entirely and attempt to sell debt at a highly discounted price post-close, hence the relatively low revised offer after 14 November. One source added that the banks will likely be impacted the worst in this if the market continues to deteriorate in the coming months, as they would have to absorb the fallout from uneasy credit investors.
Because RAM is not claiming a MAC, the banks have no real grounds to walk, a second source said. Even so, because this situation has no direct precedent, legal recourse on the financing banks’ behalf against RAM/Cerberus in the event of a forced close and ‘forced’ bridge is not out of the question as the former would likely pay a hefty price for financing.
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