AbbVie’s deal epitomised the US loan market in a year that was dominated by mergers and acquisitions – in particular from a healthcare sector that never stopped bringing hefty takeover loans to the market.
Morgan Stanley, through its lending joint venture with MUFG, underwrote the US$18bn 364-day senior unsecured bridge that gave AbbVie financing certainty when the takeover was announced in March. Morgan Stanley committed US$14.25bn and MUFG US$3.75bn.
The bridge was Morgan Stanley’s biggest single commitment as a firm in 2015. Using the lending joint venture, Morgan Stanley and MUFG were able to provide the bridge within days with speed and confidentiality, ensuring that there were no leaks prior to the announcement.
The loan kicked off a series of jumbo M&A loan financings in the healthcare sector and also gave the investment-grade loan market confidence early in the year.
“It set the stage because it gave people confidence that deals of this size could be done and that they would be refinanced in the capital markets. It showed that the bond market … and the bank syndication market would be receptive,” said Anish Shah, head of investment-grade corporate debt capital markets and acquisition finance at Morgan Stanley.
“It reaffirmed the structure of the investment-grade bridge loan,” he said.
The bridge loan, which financed a cash/stock acquisition coupled with an accelerated share repurchase, allowed AbbVie to satisfy the seller’s preference to mitigate equity dilution. It also backstopped the acquisition funding and the buyback funding.
“They structured this in a combination of cash and stock and then they completed an accelerated share repurchase to buy back approximately half of the stock consideration to synthetically create a structure that was much more cash-heavy,” Shah said.
The transaction was syndicated to existing AbbVie relationship banks with a 100% hit rate. It was also arranged in less than two weeks to ensure AbbVie was best positioned to win a highly competitive M&A process.
“We put US$18bn of committed financing in place, quickly, quietly, confidentially,” said Shah. “We then syndicated it and then took them to the bond market.”
Concurrent with the syndication of the bridge, Morgan Stanley also led an amendment to AbbVie’s existing credit facility to provide covenant flexibility to assist the transaction.
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