By Max Bower
LONDON, Aug 22 (LPC) - Syndication of the US$13.5bn debt package backing Blackstone (NYSE:BX)'s buyout of Thomson Reuters' Financial and Risk (F&R) division is expected to launch in the first week of September, at the same time as a €7.3bn debt financing backing the buyout of Akzo Nobel's specialty chemicals business, bankers close to the deal said.
Thomson Reuters' loan and bond package is expected to launch in Europe on September 3 and in the US on September 4 after the Labor day holiday, the sources said. The deal is the largest buyout financing since the crisis and its launch has been eagerly awaited since the deal was underwritten in January.
Syndication is likely to overlap with Akzo Nobel's €7.3bn-equivalent debt syndication, which backs Carlyle and GIC's carve-out of the company's specialty chemicals business, but arranging banks believe that there is sufficient liquidity in the European and US markets to absorb the two jumbo deals.
“The market can take it; there's a huge amount of liquidity out there,” a senior leveraged finance banker said, adding that the workload on investors will be spread among analysts as the deals are in different sectors.
“The analysts on the buyside looking at these two deals are going to be different people so it shouldn't be a problem,” the banker said.
Lead banks JP Morgan, Bank of America Merrill Lynch (NYSE:BAC) and Citigroup (NYSE:C) launched Thomson Reuters' financing, which comprises a US$8bn Term Loan B and a US$5.5bn bridge loan, to large institutional investors in late June. BAML is leading the loans and JP Morgan the bonds.
TOUGHER LINE
The financing package is largely unchanged, bankers said, despite a softening in the market in the early summer in Europe as investors took a tougher line with arranging banks amid a surge in supply.
Indicative pricing on Thomson Reuters term loans is 400bp, of which US$2.5bn-equivalent is expected in euros. Several buyout loans, including a €2.6bn deal backing the buyout of German energy metering business Techem, closed at 375bp in July. Pricing was adjusted higher on Techem's loan from initial guidance of 350bp.
Ebitda adjustments and leverage for Thomson Reuters' F&R division have not undergone any material changes from the previously reported numbers of US$650m and leverage of roughly six times respectively, which takes the business's Ebitda from the US$1.7bn reported number to near US$2.4bn, the senior leveraged finance banker said.
“The deal has a lot of the classic features of a leveraged buyout; there are a lot of opportunities for cost cuts. If anything the leverage may be lower than before but there's not much change there,” he said.
Leverage was previously 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 deal also includes US$1bn of preferred equity – with a 14.5% Payment-In-Kind (PIK) coupon – US$3bn of cash equity from Blackstone and US$2.5bn of existing equity, based on the F&R unit's US$20bn valuation, that will be rolled over.
While Blackstone's carve-out is still awaiting further regulatory approvals, including the US, after securing EU approval on July 23, this is unlikely to delay the debt syndication. Loan investors will earn a commitment fee on the bridge loan and a ticking fee on the Term Loan B before the deal closes.
“With any leveraged buyout you don't want to waste investors' time if the deal isn't sure to happen but Thomson Reuters is very well advanced,” the banker added.
Blackstone announced on January 30 that it was buying a 55% majority stake in Thomson Reuters' F&R unit, which includes LPC. The unit will be renamed Refinitiv.
A Thomson Reuters spokesperson declined to comment. (Editing by Tessa Walsh)