First Data to issue up to $8 bln junk bonds for LBO

NEW YORK, June 4 (Reuters) - First Data Corp. FDC.N plans to issue up to $8 billion of junk bonds as part of $24 billion in debt financing for its leveraged buyout by Kohlberg Kravis Roberts & Co., according to a regulatory filing by First Data.

The issue would be the largest junk bond offering ever, topping the $6.1 billion sold in 1989 for KKR's buyout of RJR Nabisco, according to financial data provider Thomson Financial.

The junk bond financing will include up to $5.5 billion in senior unsecured notes and up to $2.5 billion in senior subordinated notes.

Citigroup, Credit Suisse Securities, Deutsche Bank Securities, HSBC Securities, Lehman Brothers, Goldman Sachs Credit Partners and Merrill Lynch will provide a bridge loan if the high-yield notes are not sold in time to finance the buyout, according to the filing.

The financing will also include a $14 billion senior secured term loan, a $2 billion senior secured revolving credit facility, and $7.171 billion of equity.

First Data, which processes credit and debit card payments, said in April it agreed to a takeover by KKR for about $26 billion, one of the largest LBOs ever.

Voracious demand for bonds and loans from junk-rated companies has allowed buyout firms to finance acquisitions at increasingly attractive interest rates and terms.

Relative to benchmark Treasuries, yields on junk bonds hit their lowest level ever last week, about 242 basis points over Treasuries on average, according to Merrill Lynch data.

A record $408 billion of high-yield bonds and loans were issued through early May, much of it driven by acquisitions, according to rating agency Standard & Poor's.

Low defaults have bolstered investors' confidence in junk bonds, which are rated below investment grade because of their default risk. The global junk bond default rate was just 1.5 percent in April, down from a peak of nearly 11 percent in 2002, according to Moody's Investors Service.