Etiket: International news

The number of Israelis who obtained German citizenship rose sharply last year in a sign that a younger generation of Jews is shedding an aversion to the country where the Holocaust was masterminded.

According to figures published by the Federal Statistics Office this week, 4,313 Israelis received citizenship last year, an increase of over 50 percent compared to 2005, and the largest total since German records began a quarter of a century ago.

German law makes it easy for former citizens who fled the country during Nazi rule to regain their citizenship and offers the same chance to their descendants.

But few Israelis took advantage of this until recently — a shift experts attribute to rising political instability in the Middle East, opportunities within an enlarged European Union and new attitudes towards Germany of a younger Israeli generation.

The Nazis killed an estimated six million European Jews during their 12-year rule.

"The grandparents did not want to be German for obvious reasons. They taught their children that being German was a bad thing. But this is the first generation which thinks differently," said Katy Elmaliah, whose law firm in Tel Aviv helps young Israelis get German passports.

Candidates are seeking better educational and work opportunities in the 27-nation EU.

"They know it opens the door for the EU and offers many opportunities," she told Reuters.

Estimates show that some 300,000 Israelis may be eligible to become German citizens.

There are now an estimated 100,000 Jews in Germany compared with 600,000 before the war. At the end of WWII only 12,000 Jews remained.

A flood of Jewish immigrants from the former Soviet Union in the 1990s led to a rebirth of Germany’s Jewish community.

Lothar Schulz, from the federal authority which deals with granting citizenships, said renewed violence between Israel and its neighbors was a factor in the rise in applications from Israel.

"They can come here and their doors are open to most countries in the world," he said.

An Israeli man in his 30s who recently obtained citizenship but did not want to be cited by name said being German opened up new horizons for him and his family.

"For my mother and my father the memories of the past are too hard. They would never want to be German but for me it is important that I can have a European passport," he said. "I have no problem being German."

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The voice rolled through the night with the force and timbre of a highveld storm. The crowd listening clearly rejoiced to hear their beloved Afrikaans sung with such passion and power. It was hard to be sure in the flickering light of the candles, but there must have been at least 600 people under the stars in a grassy primary school arena in Krugersdorp, outside Johannesburg – all gathered to hear a young rock musician, the latest idol of Afrikanerdom, perform.

One by one they got to their feet as the concert reached its climax. Matrons in floral print dresses, students, barefoot children and civil servants all started swaying to the music. A few had tears in their eyes. Some wore the uniform of the South African farmer: khaki shirt, shorts and long socks. A couple of jokers had dressed up in the regalia of the Boer war of 1899-1902. But most were middle-class Afrikaners – the sort who had once supported the National party, apartheid’s creators.

It was like stepping back in time to the jittery last months of white rule in early 1994, which I covered as a correspondent. After 45 years of Afrikaner domination of South Africa, apartheid, imposed in 1948, ended far more smoothly than many had predicted. There were some sabotage attempts: white rightwingers set off bombs, killing more than 20 people. But most Afrikaners were too affluent and too sensible to flirt with extremism. They took a deep breath and opted, however uncertainly, for the new era.

Since democracy came to South Africa, the Afrikaner volk has been largely out of the spotlight. The National party dissolved itself. Four years ago a far-right group called the Boeremag (Boer force) attempted a bombing campaign in Soweto, which resulted in one death and the arrests of the alleged conspirators, who are still on trial for treason. But the great majority of Afrikaners, many of whose forebears fought the British in the Boer war and then supported the imposition of apartheid on the country, have quietly got on with their lives.

But the Krugersdorp concert, at the Protea Ridge primary school, was part of a new stirring in Afrikanerdom. The performer, a young folk-rock singer called Bok van Blerk, strummed his hit song: an elegy to Koos de la Rey, a daring general whose guerrilla campaign infuriated the British and helped to delay their ultimate victory by more than a year. The song shot to the top of the Afrikaans music charts, the compact disc on which it appeared swiftly becoming the second bestselling Afrikaans album of modern times. (The bestseller was a compilation for the 1995 Rugby World Cup.) As Bok’s fame spread via the radio and the internet, he crisscrossed the country, performing to packed audiences in theatres, school playing fields and stadiums.

The English translation of the chorus may sound banal: “De la Rey, De la Rey, will you come and lead the Boers? General, general, we will fall around you as one.” But when delivered in that gravelly voice, with its martial lyrics and its military beat, Afrikaner pulses start racing. Rugby crowds began bellowing for it to be played before matches.

Commentators agonised over what it meant. Was it a sign of renewed Afrikaner confidence? A paean to white rule? Or a reminder of a happier and simpler time when Afrikaners did not have to feel guilty about their past? Sympathetic voices in the media suggested that the song had tapped into a feeling of alienation creeping over some white South Africans in the 14th year of majority rule. Others retorted that the lyrics oozed rightwing revanchism and implicitly challenged the legitimacy of the ruling African National Congress. Whatever his intentions, young Bok had clearly roused a grassroots Afrikaner populism.

In the days of apartheid Krugersdorp was the ultimate bourgeois Afrikaner suburb, a repository of contented National party values. The neat suburban houses with their swimming pools mirror the environment that Bok, whose real name is Louis Pepler, was born into 29 years ago. His father was a civil servant working for the National Productivity Institute – part of the sprawling state bureaucracy which the National party used to provide jobs for thousands of Afrikaners. It was an affirmative action policy not dissimilar to the one the ANC today uses to promote black employment – and which cost Bok’s father his own job in 1995.

Before the concert, a tubby Afrikaans policeman waved me past a melee of Bok fans barbecuing their supper. I walked into the band’s changing room, vaguely expecting to find a khaki-clad throwback to the past. Instead I met a young man who looked like he could have been a Scandinavian entrant in a 1970s Eurovision Song Contest.

Bok is tall, with short-cropped hair and a little goatee beard. He was wearing bracelets, a crisp white T-shirt and ripped designer jeans. His chirpy band members were clearly bemused by all the attention. In late 2006 they were just one of many South African bands hoping to surf a new wave of interest in Afrikaans music. Now they were preparing to embark on an international tour, first in Namibia, then in London, to play for expatriates at Canary Wharf.

Bok happily concedes that his career exemplifies a flowering of Afrikaner culture. While Afrikaans has lost its predominance – it is just one of 11 official languages and no longer the language of government it was under apartheid – Afrikaner literary and music festivals are thriving. Websites testify to the emergence of a zappy new urban Afrikaner set. Many of the old Afrikaner corporations, which were founded by the Nationalists to take on the English speakers who traditionally dominated business, have modernised and prospered since sanctions fell at the end of white rule.

I asked Bok what his song was about. “It’s funny,” he says in slightly halting English. “The song wasn’t written for [a political] reason. I’m a singer, not a politician. I wanted to create something for people to be proud of. It’s like ‘Flower of Scotland’. There’s a warm feeling inside and it’s got that feel to it. My generation of Afrikaners wants to be proud of who we are, and where we come from, and our language, this whole Afrikaans thing. We grew up with the guilt of apartheid, being told, ‘You are wrong – apartheid is on your heads.’ We don’t want to say sorry any more. This is a democratic South Africa and we have moved on. We keep on being told that if we have a white skin, we can’t get a job. You walk into an interview and are told, ’Sorry’. People are fed up. The younger generation says ’enough’.”

Those who think there is a secret message in his choice of de la Rey, a bitter-einder who fought the British to the bitter end, are wrong, he insists. The reason he chose de la Rey is that it is easier to find words that rhyme with the name. The song wouldn’t have worked with Boer war generals such as de Wet, Botha or Smuts. “We wanted to write a song of the Anglo-Boer war. It is a very important war in the history of South Africa. We wanted to sing a song about history and the general, to be proud. De la Rey did not want to go to war. He stood up for the right things, for freedom, and he even said you should not discriminate because of the colour of your skin.”

To present de la Rey as a champion of a multiracial South Africa is a stretch. He was, it is true, a reluctant warrior; he argued against the push for a pre-emptive strike against British troops. But black South Africans were in those days seen by both armies as little more than hewers of wood and drawers of water. Yet Bok’s account of the song’s origins – and the reasons for its success – had a convincing ring. Clearly it appeals to rightwing racists and old-style Nationalists clinging to the past and despairing of the future. But he has also tapped into a hankering among Afrikaners – in particular of his own generation – to be allowed to shed their past and speak their minds.

As I wait for the concert to begin I join a queue at the makeshift bar. Kyle Esterhuyse and Shawn Luppa, both in their last year at high school, are in line to buy drinks for their girlfriends. They are Generation Bok. They were small children when white rule ended. Liberated from the stigma of apartheid, they can travel abroad without facing the hostile questions their parents used to endure. Indeed, like many of the generation, they are looking forward to what has become a young Afrikaner rite of passage – a stint working in London.

Cheerful, they exude the good health that comes from 18 years of growing up in relative affluence under Johannesburg’s diamond-bright skies. Far from hankering for the old days, they describe the end of apartheid as the best thing that ever happened to South Africa. But as happens in so many conversations with white South Africans (and not just Afrikaners), their attention soon turns to crime and affirmative action.

“The blacks at our school act as if it’s apartheid in reverse,” says Kyle. “My girlfriend’s aunt used to be a chartered accountant and they gave her job away because she was white.”

Shawn breaks in to tell of being held up the other day when he was on his way home from the local shop. He had to hand over two boxes of cigarettes and all his cash – 20 rand (£1.50). Kyle adds: “Two days ago our neighbour pulled into the yard. They tied him up. I was checking on my rabbits when I came upon him. They took his car and television. Police said they were planning on shooting him but they must have heard me coming.”

By now Bok is on stage. His warm-up songs are hardly the material of irredentist fantasy. They included a tribute to Bryan Habana, the Springboks’ black rugby wing; a jaunty number entitled “Girls in Bikinis”, and then one of the highlights, a riff mimicking Nelson Mandela’s high-pitched tone: “I would like you to welcome my favourite singer of all time: Bok van Blerk…viva Bok viva!” The tone is affectionate; there is no edge.

But the audience has come for one song, and when it comes, at the very end of the show, they explode into life, belting out the chorus as if singing an ancestral tribal anthem. Watching from the fringe is Kobus Koekemoer, a former civil servant turned businessman, and Conrad, his 23-year-old son, a recent tourism graduate from Potchefstroom University. “The Zulus have their leader,” Conrad says, referring to Chief Mangosuthu Buthelezi, the leader of the mainly Zulu Inkatha Freedom Party. “Where is the Boer leader? We need a leader. It’s not political. We just want someone to stand up for us.” Archbishop Desmond Tutu’s vision of a “rainbow nation” clearly holds little appeal for Conrad. Looking at the orderly, all-white stream of people leaving the concert he rolls his eyes. “If this were a black crowd leaving, it would be chaos. People would be drunk and shouting.” His father is more guarded. “It doesn’t mean anything, this song,” he says. ”It just gives you a warm feeling in your heart.”

A month or so later Bok and his band played a gig in Sasolburg, a drab industrial town south of Johannesburg. They were due to perform at the Etienne Rousseau Theatre, a soulless brick monolith typical of the totalitarian architecture of the Nationalists’ days in power. As Bok’s minibus rolled into the car park a group of young white girls, barefoot and in sundresses, rushed over to hug him. Fifty yards away, a solitary young black man sitting on a patch of public grass looked on expressionless, resting in the last of the evening sun.

Mohapi Sekeleoane works part-time at the local council. He lives in the township on the edge of Sasolburg. He had never heard of the de la Rey song, still less Bok. He also had a jaundiced view of the state of race relations in South Africa. “Apartheid is finished as a signature on paper,” he said. ”But in all our minds it is still there. Whites here still treat you the same.”

His view was a reminder of the chasm that still separates the races in South Africa outside the wealthy metropolitan areas. It was also a counterpoint to the victim mentality of some Afrikaners. Crime is appalling, and affirmative action is driving numbers of Afrikaners abroad in search of employment, but white South Africans do have a tendency to forget how relatively little they have been expected to pay, or do, to reverse the injustices of apartheid.

This clearly irks the ANC and it worries Carl Niehaus, one of the ruling party’s most prominent Afrikaners. “Bok has obviously touched some chord,” he said. “Part of it relates to a lack of understanding from young Afrikaners of where we come from. They somehow feel they are the victims of the sins of their fathers. It’s indicative of a dilemma. How do Afrikaners define themselves? Do they see themselves first as South Africans and then Afrikaners, or first as Afrikaners and then as South Africans? They are right: there is no strong Afrikaner leader. But should there be? My own belief is that they are extraordinarily fortunate to be in a society that has worked through the ravages of apartheid and hasn’t turned on the white community.”

Afrikaners need to learn some important lessons from Zimbabwe, Niehaus adds. White Zimbabweans stood apart from the rest of their society, which made it easier for President Robert Mugabe to turn on them. “No one can be forced to be part of the mainstream, but I would prefer to see Afrikaners involved in the mainstream of South Africa,” he says. Niehaus grew up in the small conservative town of Zeerust. He broke with his tribe to join the ANC in 1980. Convicted of high treason in 1983, he was sentenced to 15 years in prison. He served seven and a half years before being released with the unbanning of the ANC and went on to become Nelson Mandela’s spokesman. Niehaus is startled that the de la Rey song has become so popular – not just in conservative rural areas but also in the “higher end of the Afrikaner community”, in affluent university towns such as Stellenbosch in the Cape.

One Stellenbosch Bok aficionado is Hermann Giliomee, professor of history at the university and one of the most renowned conservative Afrikaner academics. Sitting on his stoep in a woolly tanktop, he says that a good 50 per cent of Afrikaners have done “fairly well” in the post-apartheid era. He is certainly prospering. His latest work, The Afrikaners: Biography of a People was expected to sell about 4,000 copies. Instead it sold 20,000 – a runaway bestseller by South African standards. But he regards the furore over the de la Rey song as reflecting a clash between the need of Afrikaners to assert their identity and intolerance on the part of the ANC.

“The froth of the miracle has disappeared and those Afrikaners who have decided to stay have said, ’I need to know my roots or I will get swept aside.’ They must know their history because the ANC’s version is one of guilt and shame.”

Giliomee sees himself as being on the frontline in the defence of Afrikaans and Afrikaner culture. He is deeply concerned by the ANC’s move to rename a number of Afrikaner towns and streets. His is one of several traditionally Afrikaans universities and schools embroiled in a bitter fight over what their language of instruction should be. Five years ago, in a bid to encourage more black students to apply for places, the authorities at Stellenbosch University agreed that English could be taught in the first year of undergraduate courses. Now there is pressure for this to be extended throughout the university. Of the 1,396 schools that taught solely in Afrikaans in 1993, fewer than 60 per cent are left, mostly in the Western Cape. This reflects the government’s attepts to redress the inequalities of apartheid and open up formerly white schools to black South Africans, but many Afrikaner leaders, including F.W. de Klerk, South Africa’s last white president, are worried that the very survival of Afrikaans is at stake.

In the frontispiece of his book, Giliomee quotes the author and Holocaust survivor Eli Wiesel: “To live without a past is worse than to live without a future.” His concern for the survival of Afrikaans intensified recently when the police chief in Western Cape province said police statements should be in English. For Giliomee, the de la Rey song came at the right time. “When I first heard this CD, I said it was like 9/11, a bolt from the blue. It was for us a unique stroke of luck. It hit just the right note.”

Four months after that Krugersdorp concert, the Bok phenomenon has slipped from newspaper front pages. The ANC has wisely decided to play down the controversy. Bok is planning to release another album. The Canary Wharf gig was a success, although it took place in a pub rather than a stadium. Bok seems relieved he is no longer a political football.

Yet when the histories of the immediate post-apartheid era are written, the de la Rey affair will almost certainly be seen as a milestone for Afrikaners. Possibly the most acute commentary came from Antjie Krog, a prominent Afrikaans poet and author of Country of My Skull, a haunting account of the Truth and Reconciliation Commission, the body set up to address South Africa’s troubled past.

In an essay in Johannesburg’s Mail & Guardian newspaper she suggested that the de la Rey brouhaha had been fuelled by the desire of some non-Afrikaners, white and black, to revive the traditional apartheid-era notion of the wicked rightwing Boer. The song had given people a chance to say, “Wow the Afrikaners are at it again,” she wrote. She said people needed to distinguish between two very different types of Bok fans: a minority of rightwingers, and a far larger number of middle-of-the-road Afrikaners who were unsure of themselves and their future and felt unable to shed their past.

A scene I recently witnessed in a small house on the outskirts of Ladysmith, in KwaZulu-Natal province, lent credence to her theory. Renee Human, a keen amateur historian whose forebears fought against the British forces, and her 48-year-old son, Jan, a farmer and businessman, were discussing the de la Rey phenomenon. For his children, who are in their late teens and early twenties, the Boer war is ancient history, Jan says. They have not been to the nearby battlefields. Yet they have heard and like the de la Rey song.

“It seems to have filled a void,” he ventures. “My 16-year-old went to a rugby tournament. They had songs to fit all cultures. The Afrikaners played the de la Rey song.” His mother had never heard the song before. As she listened to it on her CD player, a dreamy look crossed her face. “It’s like a waltz…” she said, and she sashayed across the room.

“It’s the sort of song that wouldn’t have been written in 1994,” Jan said. “Everyone was that much more careful then. Young Afrikaners don’t feel the same reticence now. They don’t see why they can’t express themselves. Our children feel baffled that they have to put up with the problems that we caused.”

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The new study, "Chimpanzee locomotor energetics and the origin of human bipedalism" hypothesizes that walking on two legs, or bipedalism, evolved because it required less energy than scampering on all fours.

The study is to be made public this week in the Proceedings of the National Academy of Sciences.

"For decades now researchers have debated the role of energetics and the evolution of bipedalism," said David Raichlen, an assistant professor of anthropology at The University of Arizona, who was one of the lead scientists on the study.

The researchers wrote they used "biomechanical modeling" to simulate the primates’ gaits. Scientists studied the gaits of four adult humans walking on a treadmill, and also studied five chimpanzees who were trained to walk quadrupedally (on four legs) as well as bipedally (on two legs.)

Raichlin and his colleagues found that humans walking on two legs used just one-fourth the energy that chimpanzees who knuckle-walked did.

Raichlin and his colleagues said biomechanical modeling found that on average, chimpanzees use the same amount of energy on two legs as on four, but said there was variation from animal to animal. Chimps who took longer strides were more efficient when walking upright that those who took shorter steps.

"We were able to tie the energetic cost in chimps to their anatomy," said Raichlen. "We were able to show exactly why certain individuals were able to walk bipedally more cheaply than others," he said.

Bipedalism is seen as a critical evolutionary difference between humans and apes.

Scientists theorize that the reduced energy expended in walking upright would have provided evolutionary advantages by allowing early man to forage for food more easily.

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The banks have had to dig into their own pockets to finance parts of at least five leveraged buyouts over the past month because of the worst bear market in high-yield debt in more than two years, data compiled by Bloomberg show.

Bankers, who just a few months ago boasted that demand for high-yield assets was so great that they would have no problem raising debt for a $100 billion LBO, are now paying for their overconfidence. The cost of tying up their own capital may curb earnings and stem the flood of LBOs, which generated a record $8.4 billion in fees during the first half of 2007, according to Brad Hintz, the former chief financial officer at New York-based Lehman Brothers Holdings Inc.

“The private equity firms, being very tough negotiators, are unlikely to let the banks off the hook,” said Martin Fridson, chief executive officer of high-yield research firm FridsonVision LLC in New York. “They’ll say that’s your problem and that’s why we’re paying you: To take risk.”

As the market began to turn sour last month, Goldman Sachs, Citigroup Inc., Lehman and Wachovia Corp. had to buy $725 million of bonds that Goodlettsville, Tennessee-based Dollar General Corp. was selling to finance Kohlberg Kravis Roberts & Co. purchase of the company for $6.9 billion. All of the securities firms are based in New York, except Wachovia, which is located in Charlotte, North Carolina.

Bonds Tumble

Those bonds are probably worth 94 cents on the dollar, or $43.5 million less than when they were sold on June 28, according to Justin Monteith, an analyst at high-yield research firm KDP Investment Advisors in Montpelier, Vermont. KKR completed the acquisition of Dollar General on July 9.

Bear Stearns Cos. strategists estimate that about $290 billion of deals still need to get funded, including those of Greenwood Village, Colorado-based credit-card processor First Data Corp. and energy company TXU Corp. of Dallas.

The question is “how much yield are the brokerage firms going to have to eat,” said Hintz, who is now an analyst at Sanford C. Bernstein & Co. in New York. “What they’ve committed to is not current trading rates in the market. If I have a problem it doesn’t mean I can’t place the problem, but it’s going to cause a mark-to-market loss.”

Record Sales

Acquisitions by private equity firms such as New York’s KKR and Blackstone Group LP helped push sales of high-yield bonds and loans worldwide up more than 70 percent during the first half of the year to a record $708 billion, according to data compiled by Bloomberg. High-yield, or junk, bonds are those rated below Baa3 by Moody’s Investors Service and BBB- by Standard & Poor’s.

The investment banking fees generated by LBOs in the first half amounted to almost two-thirds of the $12.8 billion paid by LBO firms to Wall Street in 2006, data compiled by Freeman & Co. and Thomson Financial show. In the race to win deals, the five largest U.S. investment banks more than tripled their lending commitments to non-investment grade borrowers during the past year to $174 billion, according to their regulatory filings.

KKR co-founder Henry Kravis in May called it the “golden era” of buyouts at a conference in Halifax, Nova Scotia. The extra yield investors demanded to own junk bonds rather than Treasuries shrank to a record low of 2.41 percentage points in June from the peak of more than 10 percentage points in 2002, according to index data from New York-based Merrill Lynch & Co. The spread has since widened to 3.07 percentage points.

No Escape

For loans rated four or five levels below investment grade, the spread over the London interbank offered rate shrank to 2.12 percentage points in February from more than 4 percentage points in 2003. It has since widened to 2.72 percentage points.

Some bankers even speculated that $100 billion LBO was possible, a scenario that is now “definitely” off the table, said Stephen Antczak, high-yield strategist at UBS AG in Stamford, Connecticut. Wall Street’s confidence in its ability to finance just about any deal led buyout firms to remove clauses in their purchase agreements that would allow them to back out if their banks couldn’t come up with the financing.

Just three of the 40 biggest pending LBOs have an escape clause that lets the buyer back out if funding can’t be arranged, said Mike Belin, U.S. head of equity derivatives strategy at Deutsche Bank AG in New York. A couple of years ago, a majority of deals included a financing contingency, Belin said, based on his research.

“If you were a credit officer or a risk manager who said `No’ to virtually anything over the last few years you were wrong,” Hintz said. “So did they take it too far? Well, yeah. But that’s part of any cycle. The issue is did they take it too far and is it going to hurt their earnings.”

Tribune Clause

Tribune Co.’s agreement to be bought by billionaire Sam Zell is one of the three acquisitions with an escape clause. Zell or Tribune can back out of the purchase if funding can’t be obtained “on the terms set forth in the financing commitments” or on similar terms, according to regulatory filings.

Zell agreed to pay $25 million to Tribune, owner of the Los Angeles Times and Chicago Tribune, should the financing fall through. Tribune spokesman Gary Weitman said banks have “fully committed” to the deal.

The market for high-yield bonds and junk-rated, or leveraged loans began to crack in June as concerns that LBOs were becoming too risky coincided with a slump in the market for subprime mortgages that caused the near-collapse of two Bear Stearns hedge funds.

Junk Losses

Junk bonds lost 1.61 percent last month, the most since March 2005 when General Motors Corp. forecast its biggest quarterly loss since 1992 and the debt lost 2.73 percent, according to Merrill Lynch.

Investors refused to buy bonds to finance purchases of companies including Dollar General and ServiceMaster Co., forcing bankers to either buy the bonds themselves or extend a loan to make up for the securities that weren’t sold.

In most deals, investment banks promise to provide loans to the buyer. They then seek other lenders to take pieces of the loans and find buyers for bonds. When buyers vanish, the banks must either buy the bonds themselves or provide a bridge loan to the borrower, tying up capital that would otherwise be used to finance more deals. The banks typically parcel out portions of bridge loans to reduce their risk.

Lending Commitments

Citigroup, the biggest U.S. bank, reported that its securities and banking division recorded an expense of $286 million in the first quarter to increase loan-loss reserves to account for higher commitments to leveraged transactions and an increase in the average length of loans.

Lehman reported on July 10 that its commitments for “contingent acquisition facilities” more than doubled in the quarter ended May 31 to $43.9 billion, exceeding its stock market capitalization of $39.1 billion. Lehman said its commitments contain “flexible pricing features” that allow it to charge more if market conditions deteriorate.

Goldman Sachs more than doubled its lending commitments to non-investment grade borrowers to $71.5 billion in the year ended May 31.

Citigroup spokeswoman Danielle Romero-Apsilos, Lehman spokeswoman Tasha Pelio and Goldman Sachs spokesman Michael Duvally, either declined to comment or didn’t return phone calls.

ServiceMaster Bonds

JPMorgan failed to sell $1.15 billion of bonds for Memphis, Tennessee-based ServiceMaster on July 3. The banks provided ServiceMaster, the maker of TruGreen and Terminix lawn-care products, with a bridge loan to make up for the failed bond sale. ServiceMaster is being bought by private equity firm Clayton Dubilier & Rice Inc. for $4.7 billion.

KKR and New York-based Clayton Dubilier this month completed their $7.1 billion purchase of Columbia, Maryland-based US Foodservice, a unit of Dutch supermarket company Royal Ahold NV, even though junk bond investors refused to buy $1.55 billion of bonds and $3.37 billion of loans to finance the deal, according to estimates from New York-based Bear Stearns.

Deutsche Bank led the bond offering, which included $1 billion of “toggle” bonds that would have allowed US Foodservice to pay interest in either cash or additional debt. KKR and Clayton Dubilier relied on loans to complete the deal, according to S&P’s Leveraged Commentary and Data unit.

`Beyond Our Risk’

“Many of these things are beyond our risk desires,” said Bruce Monrad, who manages $1.5 billion of high-yield bonds at Northeast Investment Management Inc. in Boston.

JPMorgan spokesman Adam Castellani, Deutsche bank spokesman Scott Helfman and Morgan Stanley spokeswoman Jennifer Sala either declined to comment or didn’t return calls. All the banks are based in New York, except Deutsche Bank, which is in Frankfurt.

Banks can always sell the debt if demand increases. Meanwhile, they may have to report a loss from the decline in value of their holdings, a process known as marking to market.

Banks could also lose money should they have to offer discounts on loans in order to syndicate the deals, said Tanya Azarchs, a banking industry analyst at New York-based S&P.

“I don’t think it’s going to cause banks to fail or even lead to downgrades,” Azarchs said. “But I do think there will be a little indigestion and lower earnings.”

The biggest concern is “hung deals,” where a lender is left holding a large loan to a single borrower, said Azarchs. “Those traditionally in all the prior credit cycles have caused the greatest amount of grief for the large syndicating banks,” Azarchs said.

In 1989, First Boston Corp., now part of Credit Suisse, made a bridge loan for a buyout of Ohio Mattress Co., the predecessor to Sealy Corp. The junk bond market collapsed before First Boston could refinance the loan, and the securities firm ended up owning a big stake in the bedding manufacturer.

The deal became known as “Burning Bed.”

TXU, First Data

“The thing about this business is memories are two seconds long,” said James Schell, a private equity attorney in the New York office of Skadden, Arps, Slate, Meagher & Flom LLP.

Banks led by Citigroup committed to extend $37.2 billion in credit to fund the purchase of TXU by a group that included KKR, Fort Worth, Texas-based TPG Inc. and Goldman Sachs’s private equity group. The financing will comprise $25.9 billion of term loans and $11.3 billion in an unsecured bridge loan.

Credit Suisse, based in Zurich, is leading banks in the U.S. that have agreed to provide KKR with $16 billion of loans for its $26.1 billion takeover of First Data. The plans include an $8 billion bond sale, which is scheduled for August or September, according to a Banc of America Securities LLC research report.

For firms such as KKR or Blackstone, both based in New York, the tighter credit environment may make their acquisitions less profitable and even change the way they go after future targets. Mark Semer, a spokesman for KKR, declined to comment.

“The underwriters are going to be forced to provide bridge loans and it’s getting pretty ugly, but Wall Street deserves to get smacked around a little,” said William Featherston, managing director in high-yield at J. Giordano Securities LLC in Stamford, Connecticut. “It’s been easy for so long.”

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