It’s not just Sam Zell who’s throwing the leverage around. If you think his $11 billion in new debt is excessive, just you wait until you see the size of the credit line that KKR will have lined up for its $29 billion acquisition of First Data.
Ever since First Data spun off Western Union at the end of last year, it’s basically been a boring company with steady cashflows. How do you get private-equity-style returns out of that? Easy: leverage. I haven’t seen any numbers yet, but just look at the number of firms providing equity (one: KKR) compared to the number of firms providing debt:
Citigroup, Credit Suisse, Deutsche Bank, HSBC, Lehman Brothers, Goldman Sachs and Merrill Lynch have committed to provide debt financing for the transaction subject to customary terms and conditions, and are acting as financial advisors to KKR.
Of course, getting all those firms on board also means that there are many fewer places for any potential KKR rival to raise the funds for a counteroffer.