Steve Siesser, a mergers-and-acquisitions attorney who works on many midsize buyouts, has seen the new private equity environment firsthand. Siesser, a partner with law firm Lowenstein Sandler PC in New York, got a call last week from a bank that had agreed to fund one of his client's buyouts. Siesser won't identify the deal, but says the transaction was worth several hundred million dollars and included $160 million in bank debt. The deal had been negotiated last month, before the credit crunch hit the markets in late July. Now the banker was on the phone with Siesser, dictating new terms for the deal.
The bank told Siesser it wanted to raise the interest on the debt by as much as two percentage points, to 13%. It also wanted wide latitude to add covenants, or financial guidelines that the company would have to follow to avoid being declared in default. Both demands make the proposition far more expensive for Siesser's clients, and there's a chance the deal won't close.
