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GSO scraps $1.1bn Reddy Ice deal

GSO Capital Partners, newly part of The Blackstone Group, has agreed to pay a $21 million breakup fee to Reddy Ice after credit market conditions gave GSO’s lenders cold feet.

GSO Capital Partners' $1.1 billion (€742 million) buyout of Reddy Ice Holdings, the largest distributor of packaged ice in the US, is the latest victim of tightening credit markets. The two parties were unable to close the deal because of “the condition of the financing markets”, Reddy Ice chief executive William Brick said in a statement.

“In recent weeks [Reddy Ice] and GSO have negotiated in good faith to craft an alternative transaction,” Brick said. “Ultimately…no definitive proposal for a modified buyout transaction was presented and the parties were not able to reach agreement on any alternative transaction.”

GSO agreed to buy Reddy Ice last July for $1.1 billion, including the assumption of $400 million in debt. Morgan Stanley agreed to provide $700 million in financing for the deal, but was widely reported to have said in September that it might withdraw from the deal.

GSO will pay a $21 million (€14 million) break-up fee to Reddy Ice, while Reddy Ice will pay $4 million of fees and expenses incurred by GSO in relation to the failed deal.

Brick noted, however, that Reddy Ice will “continue to explore transactions with GSO”, as well as review other strategic alternatives.

The abandoned deal joins the ever-lengthening list of LBOs scrapped because of credit market conditions, including Cerberus Capital Management’s $6.6 billion buyout of United Rentals, Silver Lake and ValueAct’s $3 billion buyout of data company Axciom and JC Flowers’ and Friedman Fleischer & Lowe’s $25 billion buyout of US student lender Sallie Mae.

Earlier this month GSO, a leveraged finance-focussed alternative assets manager with $10 billion under management, was acquired by The Blackstone Group for $930 million.