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What If Your Interest Payments Just Went Up By £161m

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The private equity owners of Alliance Boots and their banks have been forced to extend discussions on the debt package to fund the acquisition into next week after failing to reach agreement with investors.

The debt now looks set to cost about £250m more than expected for the record £11bn leveraged buy-out, according to people familiar with the terms.

According to one person close to the deal, the debt will now cost about £161m more in total interest payments for the company.

There will also be an additional £85m in upfront fees to investors, much of which is likely to be borne by the investment banks arranging the deal.

At what point does the madness stop - as every child says - are we there yet?



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This is very interesting.

Its not just subprime, but the whole area of leveraged debt that seems now to be taking on a different level of perceived risk.

I think it will be very significant if this LBO area starts to soften significantly. If the Boots bid were to fall apart, it might be a signal of a major turn in debt financing.

There were signs before of course. The flotation of Blackstone (BX) and the subsequent softening of its share price.

There is a lot riding on this particular wave, from PFI contracts funding new public buildings, to the whole private equity market.

Only connect!

The debt markets are what have been holding together many aspects of economic performance. If this weakens then many areas will simultaneously be affected.

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