Dollars and Jens
Wednesday, June 27, 2007
Sub-Prime Credit Contraction?
U.S. Foodservice has postponed the financing backing its $7.1 billion buyout by Clayton, Dubilier & Rice and Kohlberg Kravis & Roberts due to weak market conditions, people familiar with the deal told Reuters, the latest sign that the buyout business could be slowing.I don't know anything about this deal beyond what's in the article, and it's possible that the terms were simply unrealistic. But while sub-prime mortgages collapsed back in February, high-risk commercial debt and stock only went through a small, temporary pull-back.
The decision to postpone the bond offering comes after bank loan and high-yield bond investors forced U.S. Foodservice to change the terms of the financing a number of times due to the large amount of debt being assumed by the company.
I'm not sure whether this is an indicator of changes in the risk premium, but it at least seems worth noting.