More banks are poised to join a US$14 billion financing backing U.S. private equity firm Blackstone Group’s acquisition of a majority stake in the Financial and Risk business of Thomson Reuters Corp, banking sources said on Wednesday.
Bank of America Merrill Lynch, Citigroup and JP Morgan are leading the financing and are talking to other banks including Barclays, Deutsche Bank, Goldman Sachs and RBC about joining the deal shortly, the sources said.
“Every man and his dog is pitching to get in on the action,” a loan syndicate head said.
The large deal is attracting interest from banks vying for roles on the lucrative underwritten leveraged loan and high yield bond financing.
New lenders are being offered fees to underwrite 28 percent of the transaction, which will reduce the risk of the three arranging banks, the sources said. Appointments will be partly based on how much business the banks do with Thomson Reuters, they added.
Once the bank group is complete, the highly anticipated US$14 billion financing is expected to launch for wider syndication to institutional investors in March, the sources said.
Blackstone and Thomson Reuters declined to comment.
Recent market volatility has had a destabilizing effect on the debt markets, which could be exacerbated by Wednesday’s U.S. inflation figures.
The financing was underwritten before stock markets slumped on February 2, and the three lead banks may wait until market conditions are more stable to launch the deal.
“U.S. inflation figures will be a catalyst … I would expect they (the lead banks) will want to see how the next few days play out, then they’ll either rush it out or hold out and hope things improve,” a senior investor said. Prolonged volatility could encourage banks joining the deal to negotiate for better fees and titles to compensate for increased market risk, the investor said.
The jumbo deal is being run from New York and will require participation from nearly all Transatlantic loan and bond investors in order to play markets off against each other and achieve best execution for the borrower.
Secondary prices are a key indicator of volatility and sentiment and could also dictate timing as falling bids often encourage investors to seek more compensation.
Banks and investors are confident that the financing will be well received as cash-rich funds are eager to put fresh capital to work in size, the sources said.
The financing is expected to be structured with 60 percent loans and 40 percent bonds, which will give an US$8 billion-equivalent loan financing, and a potential split of US$3 billion-equivalent secured bonds and US$3 billion-equivalent of unsecured bonds, the sources said.
The debt will be mainly denominated in dollars and bankers are currently assessing how much will be denominated in euros. Even a small euro tranche could mean 1 billion to 2 billion euros of debt being syndicated in Europe, the sources said.
A US$14 billion financing would give leverage of around 7.5 times, based on last 12 months Ebitda of approximately US$1.7 billion for the F&R unit. Senior leverage of roughly 4.5 to 5.0 times could give a loan of US$8 billion to US$9 billion, and junior debt of US$4 billion to US$5 billion, the sources said.
Another source familiar with the matter said previously that leverage was expected to be below 6.0 times.
Blackstone will acquire a 55 percent stake in the F&R business in a deal valued at US$20 billion, with Thomson Reuters retaining a 45 percent holding.
Loan Pricing Corp is a unit of Thomson Reuters.
Update: Canada’s Thomson family controls more than 63 percent of Thomson Reuters shares through Woodbridge Co Ltd.
By Claire Ruckin and Andrew Berlin
(Editing by Tessa Walsh)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo courtesy of Reuters/Carlo Allegri