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Leveraged buyout creditors getting more cautious

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One of the driving forces of the buyout boom is the easy credit. In fact, not only have interest rates been low – but the contractual terms on buyout debt has been loose as well.

However, with volatility in the financial markets and the meltdown in the subprime marketplace, buyout lenders are getting a little concerned.

This is a according to a recent piece in LBO Wire [a paid service].

The article points to the cases of Graham Packaging and Ply Gem Industries, Inc. Both refinanced their debts. However, the lenders added some convent protections.

There was also resistance on the financing for the $1.95 billion deal for Realogy Corporation (NYSE: H). The buyers tried to get 225 basis points over the Treasury rate – but instead got 300 basis.

No doubt, this is fairly anecdotal. The fact remains that financing is still very loose – and more and more deals will continue to get done. But, at least in some cases, lenders are pushing back.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.
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Last updated: November 27, 2009: 08:37 PM

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