Sept. 13 (Bloomberg) -- Kohlberg Kravis Roberts & Co. may delay the sale of loans to finance the $26 billion takeover of First Data Corp. until next week after failing to agree on terms with bankers, people close to the negotiations said.

KKR, the New York-based leveraged-buyout firm run by Henry Kravis, and banks led by Credit Suisse Group couldn't agree yesterday on pricing or how much of the debt lenders will try to sell, said the people, who declined to be identified because the talks are private.

The First Data sale is the biggest to be attempted since rising U.S. mortgage defaults led to the highest borrowing costs for LBOs in four years. The planned sale is being watched by bankers and buyout firms as a gauge for how $320 billion in debt committed for pending buyouts may fare. Banks would have to hold the loans and bonds if they can't be sold to investors.

``The pricing environment in the credit markets reflects illiquidity and fear,'' said Peter Plaut, an analyst at Sanno Point Capital Management LLC, a New York-based hedge-fund manager. ``If First Data gets done, it will show a significant vote of confidence.''

KKR spokesman David Lilly declined to comment. Bruce Corwin, a spokesman in New York for Zurich-based Credit Suisse, didn't return a call or e-mail seeking comment. The group of seven banks arranging the loans also includes New York-based Citigroup Inc.

More Deals

KKR has other deals to finance after Greenwood Village, Colorado-based First Data, the largest processor of credit-card payments. The firm and TPG Inc., the private-equity firm in Fort Worth, Texas, agreed in February to acquire Dallas-based power producer TXU Corp. for $32 billion in the largest U.S. buyout. The acquisition, which has been approved by shareholders and regulators, is set to close by the end of December.

``People are looking at First Data as the breakthrough deal,'' said Robert Jones, head of high-yield research at Barclays Capital in London. ``Finding a common ground with investors is going to be a long, hard process. Investors are in a position to demand the most favorable terms right now.''

Demand for LBO debt has evaporated, with more than 50 bonds or loans abandoned or reworked since June. Investors are balking at debt without covenants, or restrictions, that give them greater power over a company's finances.

Sale Fails

Deutsche Bank AG and JPMorgan Chase & Co. last month failed to sell 6 billion pounds ($12 billion) of loans to finance KKR's buyout of U.K. pharmacy chain Alliance Boots Plc, even after discounting the price of the loans to 95 percent of face value.

The LCDX index, a gauge of investor demand for U.S. high- yield, high-risk loans, has fallen to 95.30 from 100 when it began trading in May, according to Markit Group. A decline in the index indicates a deterioration in the quality of loans.

KKR has yet to agree with banks on terms that would allow the First Data loans to be sold to investors without making the acquisition potentially less profitable, the people said.

The two sides have discussed various structures, including adding a provision that dictates how much debt First Data can assume relative to earnings, people with knowledge of the negotiations said Sept. 10.

First Data shares fell 12 cents to $33.38 yesterday in New York Stock Exchange composite trading. The stock has gained 31 percent so far this year to just under the $34 a share takeover price.

To contact the reporters on this story: Pierre Paulden in New York at ppaulden@bloomberg.net; Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: September 13, 2007 05:28 EDT