KKR seen close to First Data deal

NEW YORK (CNNMoney.com) -- Kohlberg Kravis Roberts & Co. now appears ready to accept certain covenants on bank debt it needs to close $24 billion in financing to buy payment processing firm First Data, according to a published report.

The conditions that will be written into the loans will require First Data (Charts, Fortune 500) to maintain a certain level of earnings before interest payments, depreciation, tax and amortization in relation to the senior debt, according to a report in the Wall Street Journal. KKR had been fighting to avoid such a requirement or higher interest rates to close the deal.

The paper reports that financing of the $26.4 billion deal is being closely watched as a test of debt-market sentiment in the wake of the recent credit market problems.

The KKR purchase of First Data is one of the first deals in the pipeline following the recent credit crunch. If it had not been able to close the deal, it could have spooked both debt and equity markets about other deals.

Private equity firms such as KKR had been on a buying binge the first half of the year, which had helped to lift U.S. stock indexes to record levels before the recent credit market problems.

The Journal reports that KKR will not have to pay a higher interest rate for the debt, which means First Data won't face any additional interest burden beyond what it originally expected to pay.

The paper reports it isn't clear whether being the first in line has been an advantage or disadvantage for the financing of the First Data deal.

While the uncertainty about credit markets may have made these negotiations more difficult than those that will follow, founders of some private-equity firms told the Journal that they are worried that First Data may suck all existing demand out of the market and the next deal that comes to market will fare more poorly.

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