Hedge Funds

KKR Won't Yield in Battle for First Data Financing: WSJ


Private equity firm Kohlberg Kravis Roberts is unlikely to make major compromises in talks with banks over the financing of a $24 billion deal to take over electronic payment processor First Data, the Wall Street Journal reported on its Web site on Thursday.

It said representatives of Citigroup, Goldman Sachs , Deutsche Bank, HSBC , Credit Suisse and Lehman Brothershave been locked in talks with KKR officials at the firm's headquarters in New York, trying to unblock the deal.

The banks want KKR to make some concessions on terms of loans agreed before the start of the credit market turmoil, to make the debt more attractive to nervous investors.

But an unnamed source told the WSJ the private equity firm will only negotiate on small issues.

"Why would it be right for KKR's investors for KKR to agree to change the terms of the deal?" a person familiar with KKR's thinking told the paper. "They are standing by their commitment to a public company on a certain price, which was based on the commitments from Wall Street on financing terms."

The banks want KKR to put in strict performance terms and to abandon the right to not pay interest in cash -- but these conditions could limit the flexibility of First Data if it experiences hard times.

KKR, which was planning an initial public offer in early September, announced that it expects to close deal worth a total of $140 billion in the second half of this year.

The paper said investment banks such as Goldman Sachs are trying to find ways to avoid posting losses when they report quarterly earnings at the end of the month, because the investors are already nervous about the extent of their exposure to the troubled mortgage market.