- The bank began marketing the $640 million debt deal last month
- The loans may be sold at steeper discount to attract investors
Morgan Stanley is struggling to unload $640 million of loans backing the private-equity buyout of EBay Inc.’s enterprise business after investors shunned the debt, according to people with knowledge of the deal.
The bank has been trying to sell the loans since mid-October and continues to hold the debt even after EBay said on Nov. 2 that the sale was completed. Morgan Stanley has discussed a steeper discount to lure buyers and has been probing investors in recent days about the price at which they may be willing to buy the debt, said the people, who asked not to be identified because the talks are private.
One concern investors have raised is that the company’s projected earnings may be too optimistic. Buyout targets often make adjustments to forecast earnings, called add-backs, that can reduce a borrower’s leverage.
Mary Claire Delaney, a spokeswoman for Morgan Stanley, declined to comment.
Morgan Stanley initially marketed a $540 million loan and a $100 million junior portion at 98 cents on the dollar for the acquisition, according to data compiled by Bloomberg. Investors’ commitments were due Oct. 28. The bank has talked to some investors about offering the larger loan in the low 90s and the second-lien loan in the high 80s or low 90s, said one of the people with knowledge of the financing.
Lenders have been turning their back on deals deemed risky or complicated as leveraged-loans head for their first loss in the U.S. since 2008.
A group led by private-equity firms Sterling Partners and Permira has already completed the purchase of EBay’s enterprise unit for $925 million, dividing it into four businesses, according to the Nov. 2 statement. The debt financing led by Morgan Stanley is tied to Sterling’s portion of the deal and doesn’t fund the business that Permira purchased, according to a person with knowledge of the deal.
A Sterling Partners representative said the firm isn’t able to disclose financial details surrounding the transaction. A representative for Permira declined to comment.