Home Depot Inc., the world's biggest home-improvement retailer, cut the price of its construction-supply unit by 18 percent to $8.5 billion and agreed to guarantee $1 billion of the leveraged buyout, three people familiar with the plan said.

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The sale of HD Supply to Bain Capital LLC, Carlyle Group and Clayton Dubilier & Rice was threatened by a slump in demand for debt sold by buyout firms and the worst U.S. housing market in 16 years. Home Depot, which in June agreed to sell the unit for $10.3 billion, will now retain a 13 percent stake, said two of the people, who declined to be identified because the accord hadn't been signed.

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