The firm broke new ground last month when it underwrote a portion of $1 billion in new debt issued to portfolio company SunGard Data Systems Inc. This is the first time in its 32-year history that the firm played the role of underwriter in a debt placement, and may be an industry-wide first as well.
KKR used its KKR Capital Markets division, a securities broker-dealer that was formed in 2007, for the deal. Other underwriters included Goldman Sachs Credit Partners, Citigroup Global Markets Inc. and Lehman Brothers Inc.
The debt came in two tranches: a $300 million senior secured term facility and a $700 million senior unsecured bridge loan. The smaller senior secured facility can be used for general corporate purposes, and to refinance SunGard’s existing senior secured notes due January 15, 2009, according to a SunGard regulatory filing.
The $700 million senior unsecured bridge is earmarked to help finance SunGard’s’ $624 million acquisition of a 64.5 percent stake in GL Trade SA, a financial software provider with dual headquarters in Paris and London. The bridge loan is rated “B-” by Standard & Poor’s and “Caa1” by Moody’s Investors Service, placing the debt firmly in the speculative range.
Wayne, Penn.-based SunGard provides software applications for financial services and education companies. It was acquired in 2005 by a consortium of firms that includes, in addition to KKR,
SunGard generated about $2.7 billion in revenue in the six months ended June 30, 2008, up from $2.3 billion for the same period last year, according to the company’s most recent quarterly statement. Net losses narrowed to $20 million for the six-month period in 2008 from $101 million in the first half of 2007. KKR declined to comment for this story.
While this marks KKR’s first play as a debt underwriter, the firm has been investing in the debt markets through its credit investment platform, KKR Fixed Income, since 2004. Today, KKR Fixed Income has about $18 billion in assets under management, according to its Web site.
Indeed, larger buyout firms have been extremely active in the secondary debt markets now that financings for new deals are hard to come by. In the past 12 months, firms including