A bid from Deutsche Bank is said to be standing out in an expected pack of ultra-competitive bids to provide financing to back the carve-out of Tyco's plastic business, with the bank pitching an aggressive staple-on financing play, bankers said. J.P. Morgan, Citibank, Morgan Stanley and Credit Suisse First Boston are among the group of banks looking to provide highly competitive deals to the private-equity firms circling the Tyco business. Deutsche Bank, which is shopping the business for Tyco with Goldman Sachs, is rumored to be putting a deal together offering 5-5.5 times total leverage, or 70% of the total purchase price to interested parties. "If Deutsche Bank is really on the table with this, it would be the most leveraged deal since 1998," said one banker. No timeframe could be determined for when mandates will be awarded.
Every shop on the street is after the deal, the biggest leveraged transaction of the year at over $3 billion. "It will be super competitive," said one loan banker. "It is a quarter of the way through the year and people need to make the budgets." But whoever wins the battle might end up with a deal that is too tough to sell as a result, said bankers. The banker commenting on Deutsche's rumored bid explained just over $900 million of equity would be required from the private equity shops, and about $800 million of bonds. The 0.5 part of the deal would be mezzanine financing with the rest senior secured bank debt.
But, the banker stated, "Right now it is hyperbole and no firm bids are on the table. It is being used as a marketing ploy to drum up interest," he stated. "Nobody knows what the conditions are as regards flex," he added. If Deutsche Bank did have to offer financing on these terms, it would be very tough to sell it, bankers said. Deutsche Bank spokesman Ted Meyer declined all comment. Goldman is not bidding for the financing, with one banker suggesting the bank may have conflict of interest issues. Goldman officials declined comment.
Bain Capital, The Blackstone Group and Thomas H. lee Co. have been joined by The Carlyle Group and Madison Dearborn Partners as potential buyers, said a source familiar with the situation. Another banker salivating over the potential prize explained every bank would want to work with the sponsor groups in the running. Officials at the private equity firms either did not return calls or declined comment. But one private-equity pro said, "The business has good cash-flow, and proven management and is a very attractive business."