Mergers and Acquisition boom turning into the Banking nightmare – banks cannot find buyers for several takeover-related debt offerings
Joe Weinman
Jun. 28, 2007

The economy and fiscal matters went out of control. The frenzy of buying without any care for fundamentals driven by easy money and tax cuts for the rich is turning into a banking nightmare.

The banks cannot find buyers for several takeover-related debt offerings. Easy credit has been the driving the force behind the rash of buyouts, and investors'' reluctance to buy risky debt could put the boom in jeopardy.

On Tuesday, investors rejected a $3.6 billion buyout-related bond-and-loan deal by U.S. Foodservice Inc., the nation's second-largest food distributor, which subsequently pulled the bond offering and postponed plans to sell the loans.

This is significant. It is part of a recent trend that is turning into a banking nightmare.

In the last several years, record wave of takeovers have been built on borrowed money, fueled by easy credit terms and low interest rates. Recently, since the sub prime mortgage meltdown, the easy money has become tougher to obtain.

The investment banks and consumer banks are in deep trouble as investors shun away from M&A loans.

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