Banks including Morgan Stanley and Credit Suisse AG are giving up on financing KKR & Co.’s acquisition of Ivirma Global, a Spanish fertility clinic chain, instead selling their 800 million euros ($800 million) of loan obligations to private credit firms.
(Bloomberg) — Banks including Morgan Stanley and Credit Suisse AG are giving up on financing KKR & Co.’s acquisition of Ivirma Global, a Spanish fertility clinic chain, instead selling their 800 million euros ($800 million) of loan obligations to private credit firms.
The move will force banks to pay fees to direct lenders — including Park Square Capital LLP and Intermediate Capital Group Plc — instead of earning fees they would have received for selling leveraged buyout loans to investors, according to people with knowledge of the deal.
Shifting the debt to private credit firms will help the banks — which also include Bank of America Corp. and Deutsche Bank AG — cut their risk at a time when loan and bond prices have broadly been dropping, the people said, asking not to be identified discussing private deals. Ivirma’s loan has an interest margin of 575 basis points over Euribor and was sold at a discount of 96.5 cents on the euro, according to one of the people.
Global banks are stuck with around $80 billion of commitments to finance leveraged buyouts and acquisitions, and finding buyers for the debt has been difficult. Commitments for this kind of funding helped bring about $2 billion of losses in the second quarter firms.
Since mid-August prices have been falling again in Europe, as recession risk grows and an energy crisis looms over the continent. A group of lenders led by Bank of America is separately looking to sell a $4.05 billion leveraged loan to help fund the buyout of Citrix Systems for 92 to 93 cents on the dollar.
For Ivirma, four banks earlier this year agreed to provide senior term loans to help fund KKR’s acquisition, but the buyout firm had long looked at working with direct lenders instead.
KKR, Morgan Stanley, Deutsche Bank AG and Credit Suisse AG declined to comment. Bank of America Corp. didn’t respond to a request for comment. Park Square and Intermediate Capital Group also declined.
(Adds names of some of the direct lenders in the second paragraph, and pricing in the third paragraph.)
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