EXCLUSIVE-Banks shed riskiest debt backing Veritas LBO: source

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By Davide Scigliuzzo

NEW YORK, May 23 (IFR) - Banks have cleared nearly all ofthe riskiest debt backing Carlyle's leveraged buyout of Veritas,after selling US$450m of an unsecured junk bond on Monday, asource close to the situation told IFR.

The four leading underwriters on the deal - Bank of AmericaMerrill Lynch, Morgan Stanley, Jefferies and UBS - placed the2024 bond with a select group of investors at a discount of 86.5cents to the dollar to yield 13.35%, the source said.

The bonds traded up a point in the after-market.

Carlyle had originally planned to sell US$5.6bn of debtacross loans and bonds to finance its purchase of Veritas, adata storage company, from Symantec.

But underwriters on the deal yanked the financing from themarket in November after investors balked at the terms and assentiment in the leveraged finance market deteriorated.

Barclays, Citigroup, Credit Suisse and Goldman Sachs werealso part of the underwriting group with smaller roles.

The structuring was reworked in January to give SymantecUS$1bn less in cash from the acquisition. The size of thefinancing was also reduced by roughly the same amount.

The underwriters were forced to fund the transaction andtake the debt on their balance sheets in late January when theacquisition closed.

But after Monday's sale, the banks have now shifted nearlyall of the US$825m unsecured bonds backing the deal.

An unspecified pension fund bought US$250m of the unsecuredbonds at par in January, while around US$115m was bought byCarlyle at 83.5 cents to the dollar in recent weeks, the sourcesaid.

Morgan Stanley has also sounded out investor appetite foraround US$700m-equivalent of secured bonds in US dollars andeuros at a discount of 90 to 92 cents to the dollar, for a yieldof over 9%, sources close to the situation told IFR.

But the secured bonds are not expected to launch until Julyat the earliest.

The banks also still need to sell around US$3bn of leveragedloans backing the acquisition. (Reporting by Davide Scigliuzzo; Editing by Natalie Harrison)