Less Than Half of Credit Syndicated For KKR Buyout

A $400 million buyout loan for Kohlberg Kravis Roberts & Co. has received a tepid response in the bank loan market.

The loan, which was fully underwritten last month by six banks, helped finance the $650 million purchase of nine News Corp. publications by K-III Holdings, an investment firm controlled by KKR.

Coagents Raised $170 Million

At Monday's closing date for the acquisition, the six coagents had raised only $170 million from seven other banks in the primary syndicate, meaning the credit was less than half subscribed.

A handful of mostly foreign banks that missed the official deadline for commitments are expected to join the syndicate after the closing, but the final tally is expected to be only about $200 million.

Despite the response, which was below expectations, several coagents expressed confidence that they will be able to reduce their exposure further in the secondary market.

Participants Listed

Bankers Trust Co. was administrative agent for the credit. The other coagents were Bank of Nova Scotia, Credit Lyonnais, Manufacturers Hanover Trust Co., Bank of New York Co., and Chase Manhattan Bank.

The seven banks participating as of Monday in the primary syndicate were BankAmerica Corp., Security Pacific Corp., Canadian Imperial Bank of Commerce, Long-Term Credit Bank, the Texas banking unit of NCNB Corp., Nippon, and Sumitomo Trust.

Among the stragglers still considering the deal, sources said, are Credit Agricole, Societe Generale, National Westminster, First Union, and Mitsubishi Trust.

The credit consists of a $360 million, seven-year term loan and a $40 million revolver.

Pricing Pegged to Libor

Pricing starts at 225 basis points over the London interbank offered rate but could ratchet down to as little as 150 basis points over Libor if K-III meets certain financial tests.

Syndicate members were offered commitment fees of 125 basis points for commitments of $35 million, and 100 basis points for commitments of $20 million.

Bankers said the credit was adequately priced, given that the deal is not considered a highly leveraged transaction.

Concerns About Publishing

At the same time, though, the credit ran into some resistance in the loan syndication market because of concerns about the publishing industry in general and the News Corp. publications in particular.

One banker said the credit policy committee at his bank was "uncomfortable" with such News Corp. properties as Soap Opera Digest, because "no one admits reading" the publication.

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