The PharmSource Blog by Jim Miller

The WSJ reported on June 27^th that a $1.5 billion bond deal meant to finance the leveraged buyout of U.S. Foodservice by two major private equity firms had to be pulled because investors balked at the terms, while a $4.5 billion debt offering to finance the acquisition of ServiceMaster had to reduce its payment-in-kind provisions.

The WSJ article noted that the stiffening bond environment reflected the large volume of offerings coming to the market and the recent difficulties of two high-risk hedge funds managed by Bear, Stearns. It noted that a $60 billion bond offering to finance the buyout of Chrysler from DaimlerChrysler also hit the street this week.

The Blackstone acquisition of Catalent was completed in April and is not at risk; most of these deals are closed with bank financing to bridge the time until the debt can be raised. However, Blackstone and Catalent could be looking at more costly debt, which could change their strategy and plans for operating the company.

Hopefully, the changing environment won't change Blackstone's plans to do the deal with public bond debt. Companies issuing public debt must file reports with the SEC similar to what publicly-held companies must file. If Blackstone chooses to go an alternate route, we will miss out on a valuable window into Catalent's performance and plans.