It's not over yet, M&A deals are still flourishing however financing is becoming tighter. The latest deal to run into difficulty is the leveraged buyout of General Motors' Allison Transmission business. The sale of $3.1 billion in leveraged loans for the deal has been delayed.
The delay comes on the heels of the significant reduction on Monday of a buyback plan by online travel Expedia Inc. (EXPE) The company was unable to borrow necessary funds at acceptable terms. These two are just the latest in a series of setbacks for corporate debt offerings.
More than $16 billion worth of leveraged-loan and high-yield bond deals have been canceled or postponed so far this summer, according to Fitch Ratings' estimates.
What would bring the leveraged buyout frenzy that has driven a lot of the equity market gains this year to an end? Could it be the unraveling of a mega deal?
The Cerberus Capital Management LP's $12 billion buyout of DaimlerChrysler AG's (DCX) U.S. unit may not be the biggest deal but it could be in danger of toppling over as Cerebus scrambles to find takers for the debt.
PIMCO bond manager Bill Gross noted that the Financing for Chrysler will be an important indicator of the health of the leveraged loan and high-yield markets, Gross also noted. That deal has already been put back a week and bankers are considering increasing the pricing to attract more investors. Read here for more on the state of the leveraged buyout market.
Wednesday, 25 July 2007
The gravy train starts to clog
Posted by The Fundamental Analyst
Labels: Markets
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3 Comments:
The credit cycle is definitely starting to turn and I agree that it will have an impact on the equity markets.
Today, the number of companies missing earnings and these are always low-ball numbers....who wants to miss....seemed quite high today.
NTRI a *story* stock made earnings, but cut Q3 estimates and got hammered some 15% AH.
This week will be important for the bulls, they need to break 14K and hold it, if not, the psychological momentum will alter and we may see a substantial downside break, say 10%+
jog on
grant
Duc,
Agreed, anything that even disappoints slightly is getting whacked. Even indirect comments such as AT&T's comments in iphone sales saw Apple get knocked 5%.
This all sounds eerily familiar to me. Back in 2000 anything that disappointed on the earnings front got smashed.
Did you read PIMCO's Bill Gross August commentary? I have now linked it in in the bottom paragraph of this article. Interesting stuff.
No, I hadn't, but I have now.
jog on
grant
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