TXU Gives Us Something To Talk About

When Bonnie Raitt sang about giving them something to talk about, her answer was "How about love?" But the song for the $32 billion TXU deal could hardly be called a love ballad, though the lyrics - whether they come from local officials in Texas who object to the deal, from negative press reports or from rumor mills - have been written and rewritten since the buyout deal was announced back in February.

The latest verse comes in the form of an article from Thomson Financial, which cited unnamed sources who claimed that banks led by Citi were considering paying the $1 billion breakup fee in order to convince Kohlberg Kravis Roberts and Texas Pacific Group to walk away from the buyout. The banks were trying to avoid being saddled with $37 billion in debt, the article said, which seems logical enough in a market that has become inhospitable to financing jumbo LBO deals.

The story broke out of London on July 31, and by the time the sun had set in New York, another Thomson story and a story from Dow Jones had dismissed the idea, sourcing unnamed shareholders and a person familiar with the deal, respectively.

One can only assume these people know what they are talking about, and that the original sources were either mistaken, speculating or lying. And therein lies the interesting part for me. Not the idea that Thomson may have run with a story based on what turned out to be unsubstantiated rumor. We journalists are slaves to time and competition; a good scoop cannot be sat upon for long or it will become someone else's. This is not to excuse our behavior when we go to print with something that cannot be thoroughly verified. This is only to acknowledge the truth.

But what I find compelling are the unnamed sources who originated the story. Were they simply market observers, like the one cited further down in the piece who pointed out that the breakup fee would be the cheaper way to go? Was a competitor among them or a bystander who overheard a downtrodden banker wishing the deal away?

My guess would be the former. A couple of "observers" acknowledge the breakup fee as a good idea, saying, "Sure, they're probably thinking about that," and voila! A story.

Of course, I could be wrong. But either way, it's always nice to have something to talk about.

(c) 2007 High Yield Report and SourceMedia, Inc. All Rights Reserved.

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