by Calculated Risk on 9/14/2007 07:27:00 PM

From the Dow Jones: Morgan Stanley Doesn't Like Revised Reddy Ice Deal (hat tip idoc)

Reddy Ice Holdings Inc.'s (FRZ) path to completing its $1.1 billion buyout by GSO Capital Partners LP looks rocky, after the company revealed in a filing that Morgan Stanley, the bank that has agreed to provide financing for the deal, disagrees with amended terms of its merger agreement.

This deal is small compared to many of the other deals in the pipeline, but I think it shows the investment banks are looking for any reason to exit from these LBO deals. I'm not sure Morgan Stanley is objecting to the amended terms - the amendments do not appear detrimental to Morgan Stanley - instead they appear to be arguing that the deal is off simply because they didn't consent to the amended terms. Here is the Reddy Ice SEC Schedule 14A:

Following the execution of the amendment to the merger agreement, GSO informed Morgan Stanley that the amendment had been executed. Morgan Stanley then informed GSO that Morgan Stanley believed that by entering into the amendment without Morgan Stanley's consent, the Buyers had disabled themselves from satisfying certain conditions to Morgan Stanley's commitment to provide the debt financing pursuant to the debt financing commitment letters, and, furthermore, that Morgan Stanley was reserving its rights with respect thereto. In response, GSO reiterated its position to Morgan Stanley—that Morgan Stanley's consent was not required in order to enter into the amendment, and that the Buyers had not disabled themselves in any manner from satisfying all of the conditions to Morgan Stanley's commitment. GSO promptly notified the Company of Morgan Stanley's position and GSO's response to Morgan Stanley.

More work for the lawyers.