One of the equity buyout companies that wants to take TXU private may be having trouble selling the high-yield bonds to raise the cash to complete the deal. (High-yield, by the way, is post-modern business speak for junk bonds)
That’s part of a government filing that KKR made today, in which the company said the recent upheaval in the credit markets is causing all sorts of problems. Quoting the New York Times: "The credit freeze came as Kohlberg’s bankers were preparing to sell billions of dollars of debt for the firm’s still-uncompleted deals, which include First Data and TXU."
The TXU buyout has faced a variety of obstacles even after the Legislature rolled over and played dead earlier this year. The utility’s largest stockholder said it is voting no, and I have been told that there is considerable panic among TXU officials that the deal may not go through on Sept. 7. Even if KKR can raise the necessary cash, it will almost certainly have to pay a higher interest rate on the bonds, which will put more pressure on the company to goose the TXU cash cow. This means cutting costs, raising rates, or both.
