Banks are increasingly turning down companies seeking financing to pay for debt-laden takeovers after the recent market rout left them saddled with debt from earlier deals.They highlighted banks balking over Carlyle Group's Veritas buyout:
Credit Suisse Group AG, Jefferies Group LLC and Wells Fargo & Co. are among the firms turning down new requests for financing—typically from low-rated companies—as they retreat from the lucrative but risky business of backing debt-heavy buyouts, people familiar with the matter say.
In November, a group including Bank of America Corp., Morgan Stanley, UBS Group AG and Jefferies struggled to sell about $5 billion of loans and bonds they had guaranteed for Carlyle Group LP’s $8 billion buyout of Symantec Corp.’s Veritas data-storage unit, according to people familiar with the matter. Investors balked at buying the debt after Veritas reported a sharp decline in quarterly earnings, the people said.The market for buying and selling companies cycles based on corporate valuations and deal financing. Investors are smacking down junk this NCAA basketball tournament season. Ironically the East final will be played in the Wells Fargo Center.
Carlyle ultimately renegotiated the deal in January at a price about $1 billion lower. Even so, the banks have yet to sell the loans and would face a loss of at least $250 million if they tried to unload the debt in current market conditions, bankers say.