Veritas's $5.5 Billion Debt Funding Carlyle LBO Said Pulled

After two weeks of trying to peddle debt backing the largest private-equity buyout of 2015 Wall Street’s biggest banks have given up -- at least for now.

Lenders led by Bank of America Corp. and Morgan Stanley postponed marketing $5.5 billion of loans and bonds they underwrote to finance Carlyle Group LP’s takeover of Symantec Corp.’s data-storage business as investors shy away from riskier corporate debt, according to two people with knowledge of the matter, who asked not to be identified because the information isn’t public.

If the lenders can’t sell the debt by the deal’s scheduled close on Jan.1, they may be on the hook for the entire financing. The banks had tried to sweeten terms over the past week but failed to convince lenders wary about the amount of debt being piled onto Veritas, the unit being purchased.

“Some of the companies are pushing the envelope with higher leverage,” said Matthew Duch, lead portfolio manager at Calvert Investments Inc. "And markets are pushing back."

Shunning Risk

Lenders in both the leveraged loan and high-yield bond markets, where buyouts are typically financed, are shunning anything that smacks too much of risk and are flocking to better quality deals. Carlyle is buying Veritas for $8 billion, a takeover that resulted in the unit being graded five levels below junk by both Moody’s Investors Service and Standard & Poor’s.

“Symantec continues to expect the sale of Veritas to close by January 1, 2016, as previously announced,” said Noah Edwardsen, a Symantec spokesman. “There’s no financing contingency associated with the closing.”

Representatives for Bank of America, Morgan Stanley and Carlyle declined to comment.

UBS Group AG, Jefferies Group LLC, Barclays Plc, Citigroup Inc, Credit Suisse Group AG and Goldman Sachs Group Inc. were the other banks involved in raising the debt, according to data compiled by Bloomberg.

More Fortunate

While the marketing of Veritas’s financing has floundered, other debt sales have been embraced by investors.

Last week, Avago Technologies Ltd. boosted a loan it’s seeking to finance its purchase of chipmaker Broadcom Corp. to $9.75 billion from $7.5 billion. The debt, which is the second largest to be offered to investors in the past five years, also stands out because it pays lenders a below-market rate.

Unlike Veritas, Avago is rated BB+ by S&P and Ba1 by Moody’s, the highest ranking category for below-investment grade debt.

The debt for Veritas, which was marketed as a dual-tranche deal to U.S. and European investors, initially included a $2.45 billion dollar loan, about $810 million of loans in euros and $2.3 billion of secured and unsecured bonds.

The banks revised the terms of the deal after lenders expressed wariness over the amount of debt being piled onto the unit. The loan size was cut by $950 million and the discount on it was widened to 95 cents on the dollar, while the secured bonds were bumped up to $750 million.

Before it's here, it's on the Bloomberg Terminal.