Banks Might Derail Home Depot Deal

Private equity threatens lawsuit as financing dries up
By Jason Farago,  Newser Staff
Posted Aug 24, 2007 7:10 AM CDT
Banks Might Derail Home Depot Deal
Adventures at Home Depot   ((c) billypalooza)

The pending sale of part of Home Depot took an ugly turn last night as three banks and three private equity firms entered into a showdown over financing. Home Depot dropped its asking price by over $1 billion, but the banks involved—JPMorgan Chase, Lehman Brothers and Merrill Lynch—have threatened to withdraw from a deal that may become the  first casualty of the credit crunch.

In years past banks have happily funded-private equity buyouts at handsome terms, but the current crisis has left them with a $300-billion backlog in deals to be funded. Even after Home Depot's price drop the banks remain reluctant, and Bain Capital, Carlyle Group and CD&R, the three private equity firms at the table, have threatened a lawsuit. (More private equity stories.)

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