Why is KKR Putting This Acquisition Back on the Block?
Buyout specialist firm KKR & Co (NYSE:KKR) has put its Australian acquisition Bis Industries on the block after failing to find commercial banking loans to refinance the debt originally taken in 2006 to fund the buyout of Bis.
The loans, amounting to $922.06 million, are due for repayment in June 2013, and carry an interest of the benchmark BBSY rate plus 225 basis points. Currently, new five-year Australian debt costs a minimum of 450 basis points over BBSY.
KKR’s decision to sell Bis is an unsurprising move, as private equity players are finding it difficult to flip assets in the current economic scenario where buyers are scarce and IPO markets are in the doldrums — Facebook (NASDAQ:FB) anyone?
With money tight, KKR had pioneered the use of high-yield bonds as an unconventional funding route to refinance a buyout loan of $300 million taken to acquire Singapore tech firm MMI International. TPG Capital is reportedly mulling a similar option of raising finance via an expensive high-yield bond.