MIDEAST STOCKS - Factors to watch - Sept 25
Sept 25 Here are some factors that may affect Middle East stock markets on Sunday. Reuters has not verified the press reports and does not vouch for their accuracy.
NEW YORK, July 23 KKR & Co LP on Tuesday secured the cheapest borrowing rates it ever got to fund a leveraged buyout, which could cut hundreds of millions of dollars from interest it will pay to finance its $3.9 billion takeover of Gardner Denver Inc, banking sources said.
With markets no longer worried that the Federal Reserve will end economic stimulus too soon, the private equity firm borrowed $2.425 billion in loans and $575 million in bonds for the deal at an average blended interest rate of 4.8 percent, they said, one of the lowest rates ever seen in leveraged buyouts.
The sources said KKR also arranged a $400 million revolving loan facility that does not back the acquisition and will only be drawn if Gardner Denver engages in a takeover of another company or in another major investment.
"KKR's Gardner Denver execution is the tightest large cap single B leveraged buyout financing ever done as measured by total average cost of debt. Pretty amazing considering the volatility we faced during the loan and bond syndications," said Brendan Dillon, global head of leveraged finance syndicate at UBS AG, who led the financing on the deal.
There have been major fund inflows into the high-yield market since Federal Reserve Chairman Ben Bernanke reassured markets last week that the U.S. central bank would be careful not to withdraw economic stimulus so quickly that it threatens the U.S. economic recovery.
Bankers said favorable financing conditions, if sustained, could encourage more deal-making activity, and dividend payments from companies owned by private equity firms.
Some high-yield financings were pulled in June after investors grew worried that the Fed may taper its bond buying program too quickly. Madison Dearborn's Yankee Candle Co, for instance, canceled a plan to borrow to pay out a dividend.
The lead times are long for financing such deals. KKR participated in an auction for Gardner Denver last year and reached an agreement to buy the Wayne, Pennsylvania-based maker of pumps and compressors in March.
Dillon said that debt investors accepted low borrowing rates not just because of the market conditions but also because they had confidence in Gardner Denver's credit worthiness.
"KKR is a best-in-class financial sponsor and its industrials team has a proven track record of quickly deleveraging other companies like Capsugel and Capital Safety. Gardner Denver is very large and very well diversified and the markets began to stabilize as we marketed the loan and bond," Dillon said.
A KKR spokeswoman declined to comment.
KKR had assets under management of $78.3 billion as of the end of March. Founded in 1976 by Henry Kravis, George Roberts and Jerome Kohlberg, KKR engineered the $25 billion leveraged buyout of RJR Nabisco in 1988. The massive deal was chronicled in the bestselling book and later a television movie entitled "Barbarians at the Gate."
MEXICO CITY, Sept 24 A fire broke out on an oil tanker of Mexican state oil company Pemex in the Gulf of Mexico on Saturday, forcing all the crew to be evacuated in the latest accident to plague the struggling firm.
TORONTO, Sept 24 Canada's Unifor union has set a tentative strike deadline of midnight Oct. 10 for talks with Fiat Chrysler Automobiles NV, the labor group said on Saturday as it prepares to vote on a related deal with General Motors Co.