£3bn demand for Alliance Boots

The syndicating banks are now reconsidering the amount they want to sell as the planned £1bn syndication is over-subscribed at the discounted rate of 91 percent to face value. Some of the selling banks are reluctant to meet the demand.

There has been as much as £3 billion (€3.77 billion; $5.8 billion) demand for debt relating to Kohlberg Kravis Roberts’ Alliance Boots deal, according to an investor.

Alliance Boots: £3bn 
debt bids at 91%

Apollo Management, The Blackstone Group, KKR Financial, the listed debt investment arm of KKR, and TPG Capital bid for large tranches of the debt at 91 percent to face value, the investor said. Around ten fund managers also bid for smaller portions of the debt.

The investors were told they should expect to have a deal agreed on Wednesday, but this has now been delayed until today or later.  The demand for the debt is causing some of the banking syndicate to reconsider the amount of debt they want to sell to the bidders, as the banks had initially been looking to raise between £500 million and £1 billion. Deutsche Bank has been leading the efforts to syndicate this round, as it attempts to sell down its leveraged loan portfolio.

The seller said some of the banks are reticent to sell as much as £3 billion at a discount of 91 percent to face value and are renegotiating internally the amount they plan to sell. While the banks collectively hold nearly £9 billion of debt relating to the Boots deal, some of the banks are keen to sell the remaining debt at a higher price at a later date.

A partial solution to the impasse would be to exclude KKR Financial as a buyer, the investor said.  Daily Telegraph, a UK newspaper, said KKR had not been included by the sellers as a buyer of the debt. Buyers of the debt are keen to exclude KKR Financial, because they believe there would be a potential conflict of interest should problems arise in the trading of Alliance Boots.

The banks may also elect to scale down the amount they sell to each bidder as they will not be able to change the price of the offering.

The banks have also offered an attractive financing package to the four equity houses, as they will be buying tranches of larger than £100 million, as previously reported by PEO.

A KKR spokeswoman has said it was considering a bid for some of the debt.     

The other lead arrangers for the Alliance Boots debt are Unicredit and JPMorgan.

Deutsche Bank could not be immediately reached for comment.