Forget We Offered: Tyco Rescinds Bond Sale

Less than a month old, Tyco Electronics backs out of a debt offering, blaming the "unfavorable conditions in debt markets."
Stephen TaubJuly 27, 2007

Tyco Electronics has blamed “unfavorable conditions in debt markets” for withdrawing a previously announced debt offering of up to $2 billion.

Earlier this month, credit-ratings agency Fitch rated the proposed private placement offering of notes at BBB with an outlook of stable. But on Thursday, the maker of electronic components and wireless network systems announced it would not proceed with the offering, citing the status of the debt markets as the sole reason for its decision.

Tyco Electronics — one of three companies spun out of conglomerate Tyco International last month — is not the only business that has recently halted a debt offering. In fact, Bloomberg has counted at least 40 companies that have canceled or restructured debt offerings in the past month alone. The wire service says an increase in credit-default swaps and lack of investor confidence are some of the reasons for the trend.

To be sure, most of these announcements are related to deals, rather than Tyco’s offering, which would have repaid some of its outstanding borrowings. Buyout firms need to raise $300 billion of debt to fund purchases, according to Bloomberg, citing data compiled by Bear, Stearns.

Indeed, earlier this week Carlyle Group and Canadian investment firm Onex Corp. postponed a sale of $3.1 billion in loans that would pay for the leveraged buyout of General Motors’s Allison Transmission, according to published reports. In addition, another report cites Deutsche Bank — the leading financer for KKR’s takeover of British pharmacy chain Alliance Boots — as unable to sell $10 billion of senior loans to fund Europe’s largest LBO.

And, as the Associated Press reported earlier this week, investment banks trying to raise money for Cerberus Capital Management’s planned buyout of Chrysler Group have postponed a $12 billion debt offer due to lack of investor interest.