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Saturday, 23 June 2018

Subscribe to IFR (and other TR products) to win your place on US$15bn Blackstone deal

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Loans Lenders that do business with Thomson Reuters to be given priority

More banks are poised to join the US$15bn financing backing US private equity firm Blackstone Group’s acquisition of a majority stake in Thomson Reuters’s Financial and Risk unit. The financing is made up of US$14bn of bonds and loans, and a separate US$1bn payment-in-kind note.

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, HSBC and RBC about joining the deal shortly, banking 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 financings.

New lenders are being offered fees to underwrite 28% of the transaction, which will reduce the risk of the three arranging banks, but the leads may sell more as banks are keen to lend to the deal.

Appointments will be partly based on how much business the banks do with Thomson Reuters, the sources said. Banks are currently trying to identify their outlay on various TR products to see if they can make the cut of top-spending banks.

“They [Blackstone] are trying to make sure that everyone stays spending going forward. They are trying to oil the wheels and give a better look to banks that spend money and will spend more in future,” a second syndicate head said.

The highly anticipated financing is not expected to launch for wider syndication to institutional investors until the end of June at the earliest, a banker close to the deal said.

Blackstone and Thomson Reuters declined to comment.

TIMING CONSIDERATIONS

The financing was underwritten before stock markets slumped on February 2, with a knock-on effect on debt markets. Another period of prolonged market volatility could encourage banks joining the deal to ask for better fees and titles to compensate for increased market risk, a senior investor said.

The jumbo deal is being run from New York and will require participation from transatlantic loan and bond investors in order to play markets off against each other and achieve best execution for the borrower.

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.

“I think it’s a great business. It’s a good solid subscription model with sticky customers and high cash conversion, which is what you need for good LBOs,” another syndicate head said.

DEAL STRUCTURE

The US$14bn loan and bond financing is expected to be structured with approximately 60% loans and 40% bonds. The deal also includes a US$1bn holding company PIK note, which was designed to increase leverage and has already been placed, two sources said.

The US$14bn loan and bond financing could give an US$8bn loan deal, and a potential split of US$3bn secured bonds and US$3bn unsecured bonds, sources said.

The debt will be mainly denominated in US dollars and bankers are currently assessing how much will be denominated in euros. Even a small euro tranche could mean €1bn-€2bn of debt being syndicated in Europe.

A US$14bn financing would give leverage of over 7.5 times, based on last 12 months Ebitda of approximately US$1.7bn for the F&R unit. Senior leverage of roughly 4.5-5.0 times would mean a loan of US$8bn-$9bn, and junior debt of US$4bn-$5bn, sources said.

The deal that is sold to the market is expected to have leverage of 6-6.5 times, the second syndicate head said. Another source familiar with the matter said previously that leverage was expected to be below six times.

Blackstone is buying a 55% stake in Thomson Reuters F&R unit, which includes IFR. Reuters will retain a 45% holding. IFR did not respond to IFR’s request for comment.

 

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