NEW YORK — Bankers underwriting First Data Corp.'s loans are expected to sell between $9 billion and $10 billion of the deal, a source familiar with the situation said, nearly double what they set out to sell when they began marketing the deal last week.
The bankers underwriting the deal, a syndicate led by Citigroup and Credit Suisse, kicked off the roadshow for the loans by shopping $5 billion in loans of the total $13 billion loan package.
The bankers started with a small amount of the loans rather than with the entire $13 billion because the summer selloff in the credit markets left leveraged loan investors risk averse and wary about buying new deals. First Data is the first major deal to come to the market since the Chrysler one in late July, which bankers were only partially able to sell to investors.
Kohlberg Kravis Roberts & Co. is buying First Data for nearly $30 billion in a buyout that includes $24 billion of debt financing. The loans are part of a financing package that also includes a $2 billion revolver and $9 billion of junk bond financing.
Initially, $5 billion was offered to investors with preliminary guidance set at a discount of 96 cents and a risk premium of 275 basis points over the London interbank offered rate. This is the second upsizing of the deal, which was said to be coming between $7 billion and $8 billion Wednesday.
Some of the additional loans are expected to be sold at 97 cents, one person familiar with the deal said Wednesday, helping to shave the expected losses the banks will incur. It was unclear how much of the debt would be sold at 96 cents and how much at a higher price at the $9 billion to $10 billion size. The book on the loan deal is $11 billion, according to one person familiar with the situation. The bankers may sell less of the loan than they have demand for to ensure the deal trades up in the secondary market.
Bankers are hoping to capitalize on the success of this sale to market the remainder of First Data's debt and whet investor appetite for future offerings at higher prices. The pipeline of LBO debt expected to come to the high-yield debt market in the near future stands at about $350 billion.
The success of the First Data deal has been such that one of the underwriters, HSBC (HBC), has decided to hold onto its piece of the financing with the expectation they'll be able to sell it at a higher price later on, people familiar with the situation said. HSBC is holding onto $1.5 billion with the promise not to sell it for less than 98 cents before the end of the year, according to one person familiar with the situation.
