By Andrew Berlin
NEW YORK (LPC) - The three banks leading the US$13.5bn-equivalent loan and bond financing backing US private equity firm Blackstone Group’s acquisition of a majority stake in Thomson Reuters’ (TO:TRI) Financial and Risk (F&R) unit are set to sign more banks into the deal.
Around 21 senior banks are expected to join the deal, which is being led by JP Morgan, Bank of America Merrill Lynch (NYSE:BAC) and Citigroup (NYSE:C), and is the biggest buyout financing since the financial crisis.
The lead banks invited 23 banks to join at the next level and underwrite 28% of the deal for fees ranging from around 3% to less than 1%, several sources said.
Blackstone (N:BX) is buying a 55% stake in Thomson Reuters' F&R unit, which includes LPC and IFR. Senior participation in the financing was linked to the amount of business that the banks do with Thomson Reuters.
Banks making the biggest commitments after the leads are Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS) and UBS, the sources said. There could be six or seven tiers of commitments.
Other banks that are expected to join the deal include Credit Suisse (SIX:CSGN), HSBC, Deutsche Bank (DE:DBKGn), Barclays (LON:BARC), Royal Bank of Canada, SMBC, MUFG, Mizuho, Societe Generale (PA:SOGN), Standard Chartered (LON:STAN), Natixis, BMO, Toronto Dominion, Unicredit (MI:CRDI), Intesa Sanpaolo (MI:ISP), ING and Jefferies.
The group is expected to be confirmed and banks signed into the deal in the next few days, sources said.
Blackstone could not immediately be reached for comment. JP Morgan, BAML and Citigroup declined to comment.
Lenders may have to sit on their commitments for some time, due to a lengthy commitment period, the sources said.
The deal is not expected to be syndicated more widely to institutional investors until the end of June at the earliest, and could even be launched after the summer, they added.
DEAL STRUCTURE
The deal includes a US$8bn-equivalent term loan B, which is split between US$5.5bn and US$2.5bn-equivalent in euros.
The financing also includes US$3bn-equivalent of secured bonds split between US$2bn and US$1bn-equivalent in euros, and US$2.5bn-equivalent of unsecured bonds split between US$1.8bn and US$700m-equivalent in euros.
The company will also place a US$750m revolving credit facility.
Additional funding comes from US$1bn in preferred equity – with a 14.5% Payment-In-Kind (PIK) coupon – US$3bn of cash equity that Blackstone is contributing, and US$2.5bn of existing equity, based on the US$20bn valuation, that will be rolled over.
Leverage is expected to be around 4.5 times through the secured debt and 5.6 times total debt after Ebitda adjustments, which could be as much as 30% as the transaction is a carve-out and involves reallocating costs.
The size of the debt and leverage currently imply Ebitda of about US$2.4bn, including around US$650m of cost savings, based on the last 12 months’ Ebitda of approximately US$1.7bn for the F&R unit.
The currency splits and Ebitda figures may change depending on investor demand the timing of the wider institutional syndication.