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Company crunch, Public proposition
Nervous banks are closing the credit spigots on U.S. businesses. Private equity giant KKR is going public. And big oil is doing well for itself, but big agriculture is doing it one better.
 

NEWS AT A GLANCE

Credit crunch hits businesses

Newly cautious banks are sharply cutting back on loans to U.S. businesses, even profitable ones, as the banks deal with huge losses from when they were too loose with credit. Commercial and industrial loans and short-term commercial paper extended to businesses have fallen 3 percent in the past year, the largest drop since 2001. The credit crunch was largely confined to housing until recently, but by mid-June the annualized drop in overall bank credit amounted to a $150 billion tightening, just as companies were being hit by slowing consumer spending and growing unemployment. “The second half of the year is shot,” said Michael Darda, chief economist at MKM Partners. “Access to capital and credit is essential to growth.” (The New York Times)

KKR plans public listing

Private equity firm Kohlberg Kravis Roberts & Co. said it will go public by taking over its Amsterdam-listed fund KKR Private Equity Investors LP, then changing the listing of those shares to the New York Stock Exchange. The deal could value KKR and its fund at $15 billion to $19 billion, and KKR by itself at $12 billion to $15 billion. (Reuters) The move replaces an IPO proposed a year ago, just as the buyout market started slumping. The complex, cashless deal will give KKR 79 percent of the new company and other shareholders 21 percent. Going public makes sense because “you can’t get bank debt right now, and KKR or any other private-equity firm can’t get the returns they’re looking for without bank debt,” said Dan Veru at Palisade Capital Management. (Bloomberg)

Unilever sells U.S. detergents business

Unilever, the No. 2 consumer products company, agreed to sell its U.S. laundry brands to private equity firm Vestar Capital Partners for $1.45 billion. The sale of the unit, which includes All, Wisk, Snuggle, and Surf brands, will complete the bulk of Unilever’s efforts to sell off non-core businesses. (AP in Yahoo! Finance) Unilever sold its Bertolli oil brand last week. Vestar will fold the soap brands into its Huish Detergents unit and rename the business Sun Products, which will become the second-largest player in the U.S. market, behind Procter & Gamble. (Reuters) “This is a better-than-expected price,” said analyst Richard Withagen at SNS Securities. “They’re getting good prices for their assets in a difficult economic environment.” (Bloomberg)

The oil-corn smackdown

In the battle over U.S. energy policy, big agriculture is beating big oil. The farmers’ lobby, led by agribusiness giants Cargill and Archers Daniels Midland, helped push through a massive farm bill and has successfully blocked any reduction of a 54-cent-a-gallon tariff on imported ethanol. Oil companies, meanwhile, are still fending off a threatened “windfall profits” tax and facing congressional hearings. Which isn’t to say oil firms aren’t profiting—the top seven made $83.1 billion in profits last year. But the USDA says net U.S. farm income could reach $92.3 billion this year. How to explain agribusiness clout? “Every state has farms,” notes analyst Mark McMinimy at the Stanford Group Co. (Bloomberg)

 

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