After a few months in the spring in which the credit crunch appeared to ease, the vise has tightened once again. Nothing illustrates this better than the financing for the acquisition of the Weather Channel.
NBC Universal, which is a subsidiary of General Electric, teamed up with buyout barrons Bain and Blackstone. But the deal still failed to attract traditional lenders. Much of the financing, in fact, was provided by firms affiliated with the buyers.
Three affiliated lenders provided the bulk of the financing for the $3.5 billion deal. Bain’s Sankaty Capital, Blackstone’s GSO Capital, and GE’s commercial finance arm reportedly provided over half the funding. The lead bank role was was held by Deutche Bank, which likely had to promise funding to score the mandate for the fee-heavy M&A side of the deal.
The situation is almost the reverse of the deals that were seen at the height of the buyout boom, when banks were falling over each other to provide loans for buyouts and even going so far as making equity contributions to deals. Now it seems the lenders don’t even want to lend, so the buyers are having to fund the deals largely on their own.