Leveraged Buyouts

Big-money corporate leveraged buyouts, which became the symbol of late-1980s greed on Wall Street, are making a dramatic comeback this year. The number of $1-billion-or-bigger LBO transactions--purchases of companies by outside investors, using mostly borrowed money--should reach at least 10 by year's end, worth a total of $14.1 billion, says Buyouts newsletter in New York. That would be the greatest number of billion-dollar deals in any one year since 1989.

Guesses are aplenty over whether Kirk Kerkorian or some other suitor will manage to buy Chrysler Corp. for upward of $20 billion. But merger experts Thursday said one thing is certain: The cash can be raised for a deal even that colossal. "We don't see any shortage of lenders lining up" for such a takeover under the right terms, said Lloyd Greif, head of a Los Angeles investment banking firm bearing his name. A buyout of the third-largest U.S.

U.S. banks have whittled their holdings of leveraged buyout loans to $129 billion from $163 billion at the beginning of the year by selling the debt for as little as 80 cents on the dollar, according to analysts at Bank of America Corp. The decline is a "ray of hope" for banks amid a slump in credit markets and a slowing economy, the analysts said. They estimated that the banks also have $73.6 billion of high-yield bonds they want to sell. Lehman Bros. Holdings Inc. said this week it had reduced its LBO backlog by $6.1 billion, to $17.8 billion, since the start of the year.

The largest leveraged buyout in history is unlikely to close after the Canadian telecom company BCE Inc. said an audit had found the proposed $35-billion deal to take the company private might not meet solvency requirements. An investment group had expected to complete the deal Dec. 11.

Two more investment advisory firms recommended Monday that shareholders of Caremark Rx Inc. reject a buyout offer from the drugstore operator CVS Corp. when it comes up for a vote next week. CtW Investment Group and Institutional Shareholder Services Inc. joined two other advisors who said Nashville-based Caremark's board and managers had not tried to get the best deal for shareholders. CtW held a forum Feb.

Directors of the biggest utility in Texas, TXU Corp., agreed Sunday to a $45-billion buyout, with sweeping concessions for environmentalists and consumers, people involved in the deal said. It would be the largest such buyout by private investors. The agreement calls for TXU to scrap highly controversial plans for eight new coal power plants in Texas, a promise not to build them in any other state, and a vow to double investments in wind and other alternative energy sources.

The buyout of Clear Channel Communications Inc. remains anything but clear. The high-stakes poker game to own the nation's largest radio broadcasting firm and billboard giant took another turn Wednesday when, on the eve of a shareholder vote, the company agreed to a sweetened, $39-a-share takeover offer from private equity investors valued at $19.5 billion. The bid by Thomas H. Lee Partners and Bain Capital Partners is about 4% higher than what they bid in November.

Countrywide Financial Corp.'s share price jumped Tuesday on renewed speculation of a buyout of the Calabasas-based company, the nation's largest mortgage lender. The stock climbed $2.77, or 7.2%, to $41.28 after rising as high as $42.19. "We don't know where the rumors originated," said Chris Jacobson, senior option strategist at Susquehanna Financial Group in Bala Cynwyd, Pa. "But several sources are attributing the strength of the stock to the rumors."

Four former Securities and Exchange Commission chairmen said Wednesday that too little was known about the activities of hedge funds and leveraged buyout firms. The four warned of a possible crisis if regulators don't rein in the fast-growing investment vehicles. "I continue to be concerned about the influence of pooled vehicles in the marketplace," William H. Donaldson, who stepped down as SEC chairman in 2005, said at a forum of former agency chairmen in Washington.

Silver Lake Partners and TPG Inc. agreed to buy Avaya Inc. for $8.2 billion in the largest leveraged buyout of a computer-networking company. Avaya shareholders will receive $17.50 a share, the Basking Ridge, N.J.-based company said. That's 4.7% more than Monday's closing price of $16.72 and 28% more than the price before speculation about the purchase surfaced.