The slow grind

14 September 2007 By John Foley Follow @johnsfoley

The repricing of some of KKR s debt for Alliance Boots shows how banks and borrowers can share the pain when investors go on strike. While that shifted a tiny bit of Boots’ £9bn debt mountain, the outlook is still glum. Funding new deals may yet get more expensive.

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KKR's funding banks have managed to sell on some of the debt backing the private equity firm's buyout of Alliance Boots, the UK health and beauty retailer. They have sold around half of the £750m mezzanine loans – the riskiest slice of the £9bn debt package.

The banks working on the Alliance Boots deal included Deutsche Bank, JP Morgan, Unicredito and Citigroup. The mezzanine was sold at 95% of its face value. The coupon had also been raised from 6%, back when the deal was first pitched to investors, to 6.5%.

Of the 49 leveraged debt transactions planned for the summer, 20 had their terms changed, according to a report by Standard & Poor's. The average increase in yield on leveraged loans was 41 basis points. A basis point is onehundredth of a percent.

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The slow grind

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