It’s been a good week for TXU. The Texas power company was saved from having to jump one hurdle between it and the closing of its $32 billion buyout and easily made it past another.

And the arbitrage spread on the deal - an indication of how likely investors believe a deal is to go through - shows it. It has narrowed to under 3 percent, which is considered within a normal deal range and a far cry from the 9 percent it was hovering at just a few weeks ago when it was seen as one Wall Street’s at-risk LBOs .

Its largest shareholder, Franklin Resources, has decided it will back the $69.25 offer from private equity firms Kolhberg, Kravis Roberts and Co and TPG Capital, reversing its earlier position that the number was too low. The shareholder vote is set for Sept. 7.

The reason points to the deteriorating credit markets, which have all but put a stop to new large-scale buyouts for the rest of the year. In a regulatory filing, Franklin Resources, which owns about 5 percent of the company, attributed the move to “changing market conditions” since its July 24 decision to vote against the deal.

It was never clear that a lot of shareholders shared its position - some told Reuters that they thought the deal would go through. But since TXU needs two-thirds of shareholders to back the deal, it had been an issue.

Also newly in TXU’s favor - all four of the proxy advisory firms, including the most influential one, Institutional Shareholder Services, have backed the deal. The ISS report, which came out earlier this week, pointed again towards the tighter credit markets as one reason to vote yes, saying shareholders would likely lose value if the deal did not go through because KKR and TPG has signed up for such favorable borrowing terms from the banks.

With most regulatory and political battles behind it, that sweetheart financing may prove to be the final hurdle to the deal’s closing, expected in October. Banks have been pushing private equity firms to renegotiate financing agreements with stricter terms in light of the changing appetite among investors for junk bonds, which has created a backlog of $330 billion of global debt.

Rumors last month that the banks - which include Morgan Stanley, Citigroup, Lehman Brothers, JP Morgan and Goldman Sachs - would walk away from the deal have been put to rest. But there are still lingering worries about TXU’s financing, Hilliard Lyons analyst David Burks wrote in an Aug. 30 research note. 

“There have been concerns raised that the financing of the transaction could be at risk due to the banks not wanting to take on additional debt during an onerous period in the credit markets,” he wrote.