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Arbitrage spreads, which measure the difference between the current and offered price of an acquisition target, have tightened on some closely watched leveraged buyouts — meaning investors are betting Wall St. will get to work closing the deals. 

Earlier this month the spreads had widened as tightening credit markets and fears of a global liquidity crunch turned a normal summer slowdown in mergers and acquisitions into a deep freeze. 

But arbs are growing confident again. Alliance Data, being acquired by Blackstone, has allowed the private equity firm to purchase shares before closing and said Blackstone had committed capital to complete the deal — positive signs that an arbitrage trader said were being reflected across LBOs. 

Also tightening spreads was news on TXU clearing hurdles and the Bush bounce, the trader said. 

Below are the current arbitrage spreads and those from August 10 for some closely watched LBOs.
    
 
    Target             Buyer                  Arb spread  
                                                    Current       Aug. 10
    ALLTEL           TPG; GS            4.7%           8.5%
 
    Cablevision       Mgmt                8.4%           9.9%
 
    Clear Channel   Bain                  5.7%         12.2%
                             
    First Data          KKR                 2.4%           9.5%
 
    Harrah’s            Apollo; TPG      4.9%           8.4%
 
    Hilton Hotels     Blackstone        3.7%          8.2%
 
    SLM Corp         JC Flowers      20.2%         24.5%
                             
    TXU                  KKR                 2.4%           8.8%

(Image credit. “1937 Labor Day Parade.” http://www.ufcw81.org/PublisherFiles/middle_years.htm)