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While the rumored Tuesday closing of First Data’s take-private deal could prove to be only market chatter, sources familiar with the situation said banks are nearer to agreeing on which part of the LBO-related debt will find its way into the primary market.
A preliminary issuance structure and schedule has been drafted by the banks and could be decided on as soon as next week at a Tuesday meeting, according to a source close to the situation. Although certain details of the upcoming syndication are still being discussed, it has been agreed that the majority of the USD 14bn bank generated loans will likely be off loaded with only about 30% likely to stay on banks’ books. No progress has been made in relation to the USD 8bn in high yield bonds, which banks believe would have difficulty finding buyers, the source added.
One top shareholder of the Greenwood Village, Colorado provider of merchant processing services who has been briefed on the potential structure of the debt syndication said USD 5bn in bank loans is likely to be held back with USD 9bn of the remaining loans split to have both callable and non-callable features. These two tranches of bank loans are likely to be syndicated out: aiming for 95 - 97 cents on the dollar price range. While the 95-97 range was said to be too aggressive, with investors asking for 93 and 94 range, some buyers have already expressed an interest in buying these securities at the higher levels.
A second top shareholder who has been in touch with the banks said one of the leading lenders told him it would not be interested in selling loans at “anything too close to 90.”
In regards to high yield bonds, the first shareholder said approximately USD 7.5bn of either the senior or subordinated notes may never see the light of the day, burdening banks’ own balance sheets.
A market investor closely following the situation concurred, saying that, judging by recent deals in the primary market, it is the bank debt that is getting placed and the high yield debt that will remain on the bank’s books.
Last week’s comments by both President Bush and Fed Chairman Ben Bernanke, injected new confidence into credit markets and banks, making these deals look more manageable and less tragic, changing the mood from the past several weeks of growing fear and panic in the market, the investor said.
The success of the First Data deal could determine the outcome of other merger transactions, including TXU, Ceridian, Clear Channel, United Rentals and others - all of which have buyouts that await syndication and closure.
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