The British investment bank -- whose shares have been reeling since the Brexit referendum roiled the U.K. banking sector -- initially had plans to support Krispy Kreme's $1.35 billion leveraged buyout with significantly cheaper debt than it ended up issuing this week, a source close to the deal told Real Money.
Barclays had initially intended to partially support the $1.35 billion takeover by Luxembourg-based investment firm JAB with a $350 million leveraged loan and $150 million revolving credit facility, which essentially functions as a corporate credit card, but in order to sell Krispy Kreme's debt, Barclays investment bankers ended up having to tack on a roughly 0.5% interest rate to the five-year loan's annual rate, the source said on the condition of anonymity because talks are private. The deal, which closed Tuesday, also appears to have missed an initial commitment deadline set for last Wednesday.
Increased pricing may prove taxing for Barclays, as mergers and acquisition deals are typically underwritten deals in which investment bankers are on the hook for extra costs including hiked interest rates. (JPMorgan (JPM) and BNP Paribas (BNPQY) investment bankers were secondary bookrunners on the deal.)
This is not the first hurdle Krispy Kreme has run into since agreeing to be sold to JAB Beech at $21 a share in May, as the Winston-Salem, N.C.-based doughnut retailer was recently hit with a class-action lawsuit by law firm Faruqi & Faruqi over allegations that Krispy Kreme's board of directors violated fiduciary duties in arriving at what some investor plaintiffs deem an unfair takeover value.