Aug. 9 (Bloomberg) -- Home Depot Inc. may have to accept a lower price for the contractor-supply unit it agreed to sell to buyout firms for $10.3 billion, forcing it to scale back a stock repurchase plan.

Home Depot shares fell 5.3 percent today in New York Stock Exchange composite trading, the most in more than four years.

The world's largest home-improvement retailer is in talks with Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice about restructuring the sale of HD Supply, which provides tools and lumber to builders and accounts for 13 percent of the retailer's revenue. Financing for the purchase may be at issue as investors hit by losses on subprime mortgages shun riskier debt.

``What looked like a great deal two months ago might not look so good now,'' said John Olert, co-head of North America corporate finance at Fitch Ratings in New York. Buyers ``want to make sure everything's in order before they commit.''

Home Depot is facing the same credit crunch that caused debt investors to reject bond and loan packages for buyouts of companies including Alliance Boots Plc and Chrysler LLC. Banks and private-equity firms are seeking to renegotiate terms of the loans and bonds to make them more palatable.

Talks with the buyout firms may result ``in material changes to the terms and financing of the transaction, including a reduction in the $10.325 billion purchase price,'' Home Depot said in a statement today.

Tender Offer Cut

Shares of Home Depot dropped $2.01 to $35.79 at 4:01 p.m. They have fallen 11 percent this year.

Home Depot cut the price it's willing to pay for its stock in a tender offer to $37 to $42 a share, from $39 to $44 previously. Investors who had already agreed to sell their shares at the higher range won't get that price. They can withdraw and tender the shares again if they choose, the company said.

About 3.05 million shares had been tendered as of yesterday, Home Depot said. The buyback offer was extended to Aug. 31.

``If the buyout firms get too aggressive and the deal comes off the table, all of a sudden they won't have the $10 billion to buy these shares,'' said Peter Jankovskis, who helps manage $1.3 billion, including Home Depot shares, at Oakbrook Investments LLC in Lisle, Illinois.

If the sale of HD Supply falls through, the buyout firms must pay Home Depot a breakup fee of $309.8 million, according to a U.S. regulatory filing on June 20.

Carlyle spokesman Chris Ullman declined to comment. Bain spokeswoman Charlyn Lusk declined to comment, as did Clayton Dubilier's Tom Franco and Home Depot spokeswoman Paula Drake.

Reversal of Strategy

HD Supply accounted for $12.1 billion of Atlanta-based Home Depot's $91 billion in sales last year. Chief Executive Officer Frank Blake's plan to shed the unit was a reversal of predecessor Robert Nardelli's goal of expanding the division.

``The unit being purchased is very sensitive to the housing sector itself,'' Jankovskis said. ``We were pleasantly surprised that Home Depot was able to negotiate as good a price in the first place.''

Rising mortgage rates and stricter rules for borrowers with poor credit histories have contributed to the worst U.S. housing slump in 16 years. That prompted Home Depot in July to cut its forecast for annual profit. It reports second-quarter results Aug. 14.

Nardelli and Chrysler

Nardelli, who left Home Depot in January, was named CEO of Chrysler on Aug. 6 as new owner Cerberus Capital Management LP takes control of the third-largest U.S. automaker.

Several other top Home Depot executives have departed in recent months, including Jim Stoddart, who was in charge of generating new business; customer service head Jose Lopez; top lawyer Frank Fernandez; and human resources chief Dennis Donovan.

Buyers of bond and loan packages, burned by defaults in the sub-prime mortgage market, are demanding greater yields for the high-risk debt used to fund leveraged buyouts. As much as $400 billion worth of debt may be waiting to be syndicated to fund such purchases, according to Baring Asset Management.

The perceived risk of owning Home Depot's bonds rose today, according to credit-default swap traders. Five-year contracts rose 7.5 basis points to 50 basis points, according to London- based CMA Datavision. An increase suggests deterioration in the perception of credit quality. The price means it costs $50,000 a year to protect $10 million in bonds.

Home Depot's 5.4 percent notes due in 2016 rose 0.1 cent to 93.5 cents on the dollar at 4:41 p.m. in New York, according to Trace, the NASD's bond-pricing service. The yield fell to 6.4 percent.

To contact the reporter on this story: Mary Jane Credeur in Atlanta at mcredeur@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net.

Last Updated: August 9, 2007 17:20 EDT