Private equity operators are crossing their fingers. Will the debt markets have enough capacity to fund the billions and billions of recent buyout deals?As a result, there's quite a bit of attention on the massive deal for Chrysler, which is being spun off by DaimlerChrysler (NYSE: DCX).
Well, according to a piece on Bloomberg.com, there are some bumps in the road.
On a $10 billion loan, the private equity firm, Cerberus, wanted to get a juicy rate of 3.25% (above the London interbank rate). But there were not enough takers. So, the new offer is 3.75%. And, as for another $2 billion loan, Cerberus tried to get 6% (above Libor), but has now upped it to 7%.
This certainly seems reasonable. Despite the extreme liquidity in global markets, there are still limits.
Besides, Chrysler is not a slam dunk deal. The competition is brutal and the employee benefits are onerous.
But, it still looks like the deal is on track – although, it's not going to be cheap.
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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