Capital Access And The First Data Buyout

Barron's had a quick reference to the upcoming First Data buyout, the amount of financing needed and whether or not the deal would get done.

Rightly or wrongly, some folks are placing a lot of importance on the deal as a proxy for accessing capital.

The Allison Transmission deal was completed last week with some concessions and that might have been viewed as a proxy for getting the First Data deal done.

The Allison deal required a tad of ingenuity to get done - but it was done. The First Data deal may also require some fast thinking. It seems like there are some parallels to the UAL deal in 1989. For those who do not know an LBO of UAL fell through in October of 1989 which was a surprise to the market causing a one day 6.1% mini-crash on October 13. The market retraced that crash by January 2, 1990, a little less than three months later.

My hunch is that the First Data deal will get done but if not, the market has dealt with "important" deals falling through before. If it does not happen and if it is as important as some people think it could cause a something fast and nasty.

Something like this, even if this specific deal does go through, has the potential to blindside people.

The bigger threat here is access to capital. I wrote the other day that I think this week's rolling of commercial paper will not be the seminal event that some fear, but this deal failing to happen becomes a symptom of a problem that would take a while to unfold. It may have started unfolding in July, or maybe it started in the Spring when New Century went under. This sort of slow rolling over should be of more concern than any short term, specific event.

If this has been a multi month rolling over, it highlights a point I have made many times, but I am not the one to discover this: bear markets start slowly and give you plenty of time to get out.

Throughout the summer I have talked about the couple of tweaks I have made, in keeping with my thoughts about how to get defensive and urged have readers not to get panicky. That is still the message.