Tuesday, October 16, 2007
The WSJ Deal Journal had a post yesterday on the Flowers group's allocated liability for the $900 million break fee in connection the SLM merger agreement. The post quoted a source who stated that:
“It has been difficult to get information out of Flowers on this one,” one investor told PE Hub. “We aren’t even sure how the $900 million breakup fee will be allocated among the syndicate.”
The post then linked to a Breakingviews post asserting that the Flowers group was only on the hook for $200 million of the $900 million fee if it was required to be paid (that is a big if).
I'm not sure where these figures come from. In the SLM complaint, SLM states that Flowers has guaranteed $451,800,000, JP Morgan $224,100,000, and BofA $224,100,000 of the $900 million termination fee. So, again, I don't know how breakingviews got from $451 million to $200 million.
Of course, internally and privately the parties may have reordered these guarantees. This may very well be the case as some public reports have stated that JP Morgan and BofA are driving this renegotiation and stand to lose a much greater amount than the termination fee if the deal goes through. It would not be a surprise if they agreed to cover some of Flowers potential liability here in case SLM is successful on its claims in Delaware.