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United Rentals said that Cerberus is not prepared to proceed with the purchase of the company on the terms set forth in its July takeover agreement.
Though Reuters reported earlier Wednesday that Cerberus was worried about the company's economic outlook, Cerberus said there has not been a material adverse change at United Rentals, according to United Rentals.
The company's release came after a Reuters report saying Cerberus was prepared to walk away from the deal.
United Rentals [URI
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] shares plunged almost 31 percent Wednesday.
Investment banks funding the deal are struggling with selling the associated debt offering.
A Cerberus spokesman declined to comment.
Last week, United Rentals' high-yield offering failed to price, according to KDP Investment Advisors. The pricing of the offering and the loan offering come at a tough time for banks, with the credit markets taking a further hit from large losses on Wall Street.
Credit Crunch
The high yield debt offering is led by Credit Suisse [CS
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], Banc of America Securities [BAC
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], Morgan Stanley [MS
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] and Lehman Brothers [LEH
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].
Investment bank UBS advised United Rentals on the deal. The bank declined to comment.
The $4 billion leveraged buyout agreement in July was announced right as the credit market seized up from the subprime mortgage meltdown.
The credit crunch has made it tough for banks to syndicate debt and loans, and they have leaned on private equity buyers to renegotiate debt terms.
In some cases, the private equity firms have decided to walk away from the deal and pay a break-up fee or come to some kind of agreement.
United Rentals, in the third quarter, said free cash was $43 million, compared with $123 million in the year-ago period.
Private equity firms need strong cash flows to pay down debt used for leveraged buyouts.
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