Daniel Primack over at PE Hub, in his post sizing up the Clear Channel (CCU-OLD) settlement, said it was difficult to determine if the banks were winners or losers. Given the failure of the banks to present a united front, as described by Deal Journal, having John Mack’s top bankers step up to work out a solution was just about the best outcome the banks could have hoped for.
After going to court, the banks cannot compare the outcome to just paying the break-up fee not to do the deal. They traded a lower loss on this debt to improve their reputations and cap the losses that could have been enormous if the court case went forward. Yet, it is worth noting that the court case may have been an exercise in futility for the sponsors if their damages got capped at $600mn by the courts. If this settlement makes the sponsors give up more on BCE (NYSE:BCE), then clearly the banks are winners here.
However, KKR (KFN) is in on BCE with the Ontario Teachers, and KKR has been notoriously tough to negotiate with. Witness the TXU (TXU) negotiations that were successful only because TXU was still seen by buyout debt investors as a deal that had not been overlevered and they bought a performing company.