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Nasdaq's Risky Bid

The decision by the Nasdaq Stock Market (NDAQ) to finance its planned acquisition of the London Stock Exchange mostly with loans is certainly in tune with these debt-laden times.

But the Nasdaq's plan to add more leverage to its balance sheet as it pursues a hostile takeover bid for the London exchange is striking a discordant note with some on Wall Street.

Credit analysts are concerned that the Nasdaq, which has secured debt financing from Bank of America (BAC) and Dresdner Kleinwort to pay for its $5.1 billion bid, is taking on too much leverage to pull off the merger. They worry about the Nasdaq loading up with a debt for an acquisition that could raise "integration risk,'' given the London's continuing opposition to a merger.

Nasdaq revealed more details about its financing plan in a regulatory filing on Monday. The electronic equities exchange says that besides a series of secured and unsecured loans, it also has entered into an agreement with BofA and Dresdner to sell up to $775 million of preferred stock. Towards the end of next year, Nasdaq will be required to use "a percentage of its excess cash flow" to repay the outstanding loans.

Shares of Nasdaq fell 59 cents, to $40.04 in afternoon trading.

A week ago, Nasdaq offered to buy the 71% of the LSE that it does not already own for 1,243 pence a share, or $5.1 billion. The offer comes eight months after Nasdaq's original $4.2 billion bid, was similarly snubbed by the London exchange.

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