Kohlberg Kravis Roberts & Co.'s bankers have found buyers for the highest-yielding loans financing its purchase of U.K. pharmacist Alliance Boots in a sign demand for credit may be improving.
Deutsche Bank AG, JPMorgan Chase & Co. and UniCredit SpA, which last month abandoned selling 6 billion pounds ($12 billion) of mostly senior loans, probably will next week finish syndicating 750 million pounds of mezzanine debt that ranks last for repayment, two bankers involved said.
KKR's eight underwriters have been saddled with all of the 9 billion pounds of debt financing Europe's biggest leveraged buyout after investors rejected high-risk, high-yield loans. Banks in the U.S. are attempting to raise $16 billion of loans for KKR's acquisition of First Data Corp. in the biggest debt sale since rising U.S. mortgage defaults led to the highest borrowing costs for buyout firms in four years.
This, combined with the Countrywide release and the commercial paper news release from the Fed are all encouraging signs.
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However, since Northern Rock going cap in hand to the Bank of England with the BofE in the role as lender of last resort was the top story on the BBC's main evening TV news here in the .uk last night, complete with very heavy handed resassurances about the lack of need for panic and a dearth of actual information, and an updated version appears to still be the top story this morning, I suspect we're not quite out of the woods yet.
Here's some bits from the latest Bloomberg version, which seems to have some details.
Sept. 14 (Bloomberg) -- The Bank of England provided emergency funding to Northern Rock Plc after fallout from U.S. subprime mortgage defaults prompted a ``severe liquidity squeeze'' and cut off its access to capital.
Shares of the U.K.'s fourth-largest home lender plunged as much as 19 percent, a record drop, after it said it will get a short-term credit line to keep operating. Pretax earnings will be between 500 million pounds ($1 billion) and 540 million pounds, missing analysts' estimates of 647 million pounds, Newcastle, England-based Northern Rock said in a statement today.
The Chancellor of the Exchequer Alistair Darling authorized the move, saying the Bank of England will step in as the U.K.'s lender of last resort ``where institutions face short-term liquidity difficulties.'' Northern Rock is vulnerable to funding constraints as it has a smaller deposit base than larger lenders.
``This is a set of circumstances that I've not seen in 25 years,'' Chief Executive Officer Adam Applegarth said on a call with journalists. ``It's a substantial program, it is at a penalty rate. The facility will provide a solid ground base.''
...snippety...
Credit-default swaps based on Northern Rock's debt rose 45 basis points to 175 basis points, according to Deutsche Bank AG prices.
``The outlook for Northern Rock as an independent entity does not look good,'' said Sandy Chen, a London-based analyst at Panmure Gordon & Co., who has a ``sell'' rating on the stock. ``Punitive borrowing rates are set to inflict severe damage on its profit margins well into 2008 and this will also impact its lending growth targets.''
Northern Rock is the U.K.'s worst performing bank stock this year. Its shares fell 46 percent through yesterday, compared with the 12 percent drop of the nine-member FTSE All Share Banks Index. The shares fell 127 pence to 512 pence as of 8:20 a.m. in London, valuing the lender at 2.15 billion pounds.
The decline in the stock price already made it an ``attractive'' acquisition target, MF Global Securities Ltd. analysts said this week. Chen said today he does not expect any buyers for Northern Rock ``in the short term.''
...snip...
Link to the The Bank of England Press Release
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