Americas Loan House: Barclays

Prior to the transaction announcement, joint lead arrangers Citigroup, Bank of America Merrill Lynch and UBS provided Molson Coors with a US$12.3bn underwritten bridge loan facility. Syndication of a US$9.3bn bridge loan, a US$3bn delayed draw-term loan and an amendment to the existing US$750m revolver was launched soon after. The bridge loan included a US$1.5bn three-year term loan and a US$1.5bn five-year term loan slated to become part of the company’s permanent financing. The two loans were also successfully syndicated despite lenders being increasingly selective this year, especially when it came to funded term loans. Regulatory pressures and dollar funding costs have been driving a focus on relationship return, and interest in term loans has waxed and waned based on the size and expected time until delivering, as well as how much lenders have been holding on already-existing deals. “There was a fairly large bridge that went along with it and a lot of other capital market opportunities. People have struggled with term loans when there is only a term loan to think about,” said Carolyn Kee, head of Citigroup’s North America loans. “Here, there were other opportunities for people. The term loan was large, but it wasn’t 10 people. I think people were able to step back and see why this was a transformative transaction for the company and a lot of near-term opportunities to participate in.” The facilities were well received by lenders and oversubscribed with a 100% hit rate for existing Molson Coors relationship lenders invited into the bridge and the revolving credit facility amendment. The deal also attracted non-relationship lenders for additional capacity. Syndication was completed in three weeks and the facilities closed in December 2015. Pricing on the bridge loan is tied to the company’s credit rating and opened at 150bp over Libor on both the bridge loans and term loans. To encourage a swift replacement with permanent financing, pricing on the bridge loan was set to increase by 25bp every 90 days. “It was appropriately priced, which helped,” Kee said. “It wasn’t underpriced but we didn’t have to price it over market to attract people. It was the name and the opportunity that allowed people to say ‘term loan makes a lot of sense here’. The company is going to delever very quickly.” In February 2016, Molson Coors successfully closed a US$2.6bn equity offering. In June, the company completed a US$5.3bn four-part bond offering, a C$1bn (US$746m) two-part bond issuance and an €800m bond issuance, resulting in a termination of the remaining bridge commitments. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

In a year of low loan volumes in Latin America, the deal stood out for its uniqueness and the borrower’s ability to navigate a complex funding process for what was Colombia’s largest privatisation in nearly a decade. When the Canadian investment group agreed to buy 57.6% of state-controlled utility Isagen in January for approximately US$2bn, Scotiabank and SMBC were quick to stump up US$600m to support the deal. But a lengthy privatisation meant that leads had to time syndication to take place just before the last of two subsequent tenders for the remaining shares, which resulted in Brookfield acquiring a 99.64% interest for about US$3.5bn. That was a risky proposition for underwriters, who were ultimately forced to wait until late June even before starting the lengthy process of offloading debt whose pricing and tenor had been set earlier in the year. By that time, lenders that had seen their funding costs rise were less enamoured with the pricing, the five-year tenor or indeed the holding company structure being used by Brookfield. Syndication of the loan closed on September 7. “Between January and September, a lot of banks saw their funding costs increase, and Colombia was a new market for some of them,” said Kristie Pellecchia, head of loan syndications for Latin America and US corporates at SMBC. “A holdco loan was also a non-starter for some banks … but the mandatory prepayments were fairly aggressive and that helped the remaining banks to be open to doing a holdco.” Further complicating the trade was Brookfield’s desire to fund a portion of the acquisition in pesos in an effort to reduce FX risk. That meant bringing in local banks that were not typically used to lending under an international structure and preferred to drive deals from start to finish. It also increased risks for leads that had originally funded in dollars amid heightened FX volatility and rising interest rates in Colombia. “We wanted to be as flexible enough to give [Brookfield] the opportunity to do as much of the loan in Colombian pesos,” said Pellecchia. Staying the course, leads were able to stick to Brookfield’s targeted pricing to complete a US$600m five-year package. In the end, they syndicated a US$322.4m tranche at 250bp over Libor and a Ps525bn (US$177.6m) loan at 390bp over the local interbank rate. Leads also came in with a US$100m revolver. The dollar tranche was syndicated among Natixis, Mizuho, Banco de Credito del Peru and Atlantic Security, while the peso tranche was placed with Bancolombia and Davivienda. The Export Development Bank of Canada provided a US$150m loan alongside the term loan. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

Yet again, BNP Paribas topped Thomson Reuters bookrunner league tables for the awards period, with US$54.2bn of volume and 201 deals, giving it a leading 7.72% market share. The year caps a hugely successful run for the French bank, which has dominated EMEA lending as top bookrunner for six of the last seven years, only ceding the top spot to Deutsche Bank in 2012. BNP Paribas has increased its EMEA bookrunning share in each of the last three years from US$48bn and 208 deals in 2013 to US$60bn and 252 deals in 2015, despite increasingly fierce competition from highly liquid banks. “BNP Paribas has remained at the top of the league tables, we’ve been there consistently and still are,” said Charlotte Conlan, head of loan and high-yield syndicate, EMEA. The loan market has been under pressure in the last 12 months due to an uncomfortable combination of rock-bottom pricing and rising macroeconomic and political risk, which made maintaining a market-leading position no mean feat amid a shortage of deals. At the end of September, EMEA loan volume of US$590bn was 22% lower, with a bigger 32% drop in leveraged loans as sporadic M&A activity failed to compensate for what used to be high levels of corporate refinancing . “We’ve improved year-on-year and in a quieter year of low issuance we’ve increased our market share, which is a testament to our origination business,” Conlan said. BNP Paribas is reaping the rewards of creating a single corporate debt platform in 2015, which brought together the loan and bond origination teams in addition to a single global syndicate platform. This has been supplemented by specialised teams that assist clients with asset financing, including real estate, energy, infrastructure, transportation and export finance as the bank focuses on developing its next generation of management. “We have made a huge effort to de-layer with a younger and more diversified management team. We were very French; the new generation is less French and male, and more female and international,” said Pierre Semeria, head of investment-grade loans. BNP Paribas remains a resolutely European bank and has an enviable client roster with 1,600 accounts across Europe, rising to 2,000 including middle-market companies. “The loan product is a core business to the bank,” Conlan said. “Given the breadth of our corporate loan product everywhere, we’ve clearly outperformed our competitors on our ability to deliver – even in a quieter market – due to the uniqueness of the platform we have.”Across the board BNP Paribas played across the board from the biggest investment-grade names that defined the year to middle-market deals, leveraged loans, and energy and infrastructure finance. It was also active in a range of more esoteric products including Schuldscheine – Europe’s fastest growing product this year – and the fast-developing world of fund finance. In investment-grade lending, the bank was one of two underwriters, MLAs and bookrunners on US$13.1bn of facilities backing French food company Danone’s acquisition of US rival WhiteWave. It was also one of two underwriters and bookrunners on Air Liquide’s US$13.4bn acquisition of US-listed Airgas and was an agent on Anheuser-Busch InBev’s US$42.5bn acquisition loan backing the takeover of rival SABMiller. BNP Paribas has been developing its franchise further in Europe, outside its French power-base. A strategic push in Germany that has been many years in the making finally started to bear fruit, as the bank took advantage of German banks’ weakness to add high-quality risk. This brought mandates including a role on German consumer products maker Henkel’s US$2.5bn bridge loan backing its acquisition of US laundry and home care products maker Sun Products and the bank was one of four coordinators on German automotive parts maker Schaeffler’s €2.3bn crossover refinancing. Sentiment ebbed and flowed in leveraged loans during the year, but BNP Paribas was undaunted. It was straight out of the gate

Thanks to its global operations and its Israeli domicile, Teva was able to turn to the European loan market to achieve European-style financing and far cheaper pricing than it would have achieved in the US, where financing for the healthcare sector had become more difficult amid political pressure over increased drug costs and tax issues. “Over the past few years the company has been very acquisitive. It has been doing larger and larger deals, and this is its largest-ever deal,” said James Horsburgh, managing director in HSBC’s capital financing, global banking and markets team. The background to the acquisition had its own dynamic. In April 2015, Teva launched a US$40bn unsolicited bid for generic drugmaker Mylan – a deal that received full credit approval for a financing from banks – before dramatically withdrawing its proposal and announcing its US$40.5bn acquisition of Allergan Generics on July 27 2015. Teva moved quickly to secure the initial underwriting of the loan via Bank of America Merrill Lynch, Barclays, BNP Paribas, Citigroup, Credit Suisse, HSBC, Mizuho, Morgan Stanley, RBC and SMBC. The financing initially comprised a US$27bn bridge loan for one year plus two six-month extension options; and a one-year US$6.75bn bridge to equity that was kept with the underwriting banks. Launching into wider syndication in October 2015 (and not signed until November 19), the bridge loan was reduced by US$5bn through the addition of a US$2.5bn three-year term loan and a US$2.5bn five-year term loan to the financing structure. Teva took advantage of high levels of liquidity in the European market and achieved very competitive pricing on the loans. The bridge paid 40bp over Libor for the company’s BBB/Baa2 rating, while the three-year term loan pays 112.5bp and the five-year term loan pays 125bp. “[Teva] should be very pleased with the pricing they achieved,” Horsburgh said. The loan garnered strong support from the market in both Europe and the US, with a total of 12 banks joining the 10 underwriters. Success also followed for the subsequent bridge loan take-outs. The equity bridge was rapidly replaced through a US$6.75bn equity and equity-linked raise in December 2015, while the company raised more than US$20bn across three currencies – US dollars, euros and Swiss francs – in July 2016, ahead of the closing of the acquisition on August 2 2016. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

Hong Kong-listed Tencent announced its US$8.6bn purchase of a stake of up to 84.3% in “Clash of Clans” maker Supercell in mid-June – only days before Britain voted to exit the EU – and wrapped up the syndicated financing in October just four months later. Tencent’s largest acquisition to date was also the world’s largest buyout of a game developer, while the financing marked the borrower’s debut leveraged loan. It also faced several challenges when it approached its relationship banks in early July for a non-recourse loan with a five-year maturity. Banks were nervous about the impact of market volatility in the aftermath of the Brexit vote, while the asset-light internet sector has only recently begun to win over Asian lenders. Supercell also lacked a long track record, having been founded as recently as 2010. While it has only launched four titles since then, all are commercial hits, quickly making Supercell the world’s largest standalone mobile games company. It was far from clear that Tencent’s M&A financing would attract enough lenders after a glut of big borrowings from the sector, particularly as it was a non-recourse facility. Tencent made its own syndicated loan market debut just two years ago, and had wrapped up credit lines totalling US$6.89bn in the seven months before it announced its Supercell purchase. In early June, Tencent closed a US$4.44bn five-year loan that was tripled from its original size of US$1.5bn following commitments from 25 banks. That followed a US$2.45bn five-year facility Tencent had closed in December with 19 banks. Asian lenders had also only recently participated in two other big loans from the Chinese technology sector. Around the same time as Tencent closed its loan in June, internet company Baidu was signing a US$2bn five-year financing. Those deals also followed e-commerce giant Alibaba Group’s US$4bn five-year loan in April. However, Tencent provided credit enhancements in the form of letters of comfort and undertaking, and it also paid generously compared with the company’s previous two transactions. The top level all-in pricing was 235.1bp based on a blended interest margin of 212bp over Libor and an average life of 4.314 years. The financing closed within six weeks of launch into general syndication in mid-August. Underscoring Tencent’s enormous appeal, a total of 23 banks participated, including seven MLABs – ANZ, Bank of America Merrill Lynch, Bank of China, China Merchants Bank, Deutsche Bank, HSBC and Shanghai Pudong Development Bank. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com

The deal had a number of unique elements and surprised traditional players in the space Leveraged loans are typically restricted to issuers with long histories of generating cash. But Uber has famously burned through cash and generated negative Ebitda to fuel its rapid growth, leaving the company with no excess cashflow to pay back debt and no debt-to-Ebitda leverage ratio – a hard sell. Still, despite these hurdles, Uber priced the loan in July at 400bp over Libor with a 1% floor, 110bp tight to the broader Single B loan index at the time. “If you go back five or 10 years, the market never would have touched this thing,” said Jim Bonetti, head of North American leveraged finance and leveraged finance syndicate at Morgan Stanley. “It is wildly unique. It took a lot of thought to structure properly, and then a lot of time and effort to get people who are driven by cashflow and statistics to buy something with no cashflow or negative cashflow.” Morgan Stanley led the deal, along with Barclays, Citigroup and Goldman Sachs. “You’ve never seen anything like that,” said Andrew Earls, head of North American leveraged finance at Morgan Stanley. “There was no balance sheet. There were a few lines and Ebitda and a few years of projections and that’s it.” Uber benefited from its strong brand and as a product that investors use on a regular basis. But even so, persuading investors still took a lot of hard work, not least because the suprise UK vote to leave the European Union came just a day after the loan was launched. “We lost every investor in the book, but we had enough of a strong story in our mind and were able to sell it,” said Earls. The arranging banks had additional challenges to overcome: Uber is notoriously tight-lipped and wanted to limit the number of potential investors. They also had to make sure the deal would pass scrutiny from federal regulators, which are clamping down on any deals where debt is more than six times Ebitda. “The strategy on something like this is to point to the cashflow generation and that’s a key measure. And then you have to point to the valuation of the equity,” Earls said. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com <object id="__symantecPKIClientMessenger" style="display: none;" data-install-updates-user-configuration="true" data-extension-version="0.4.0.129"></object>

Strong demand enabled it to become the most tightly priced deal in the European leveraged loan market in 2016. “This is the trend-setter that others followed. It caused the market to wake up on how buoyant and well-capitalised the loan market is,” said Dominic Ashcroft, co-head of leveraged finance capital markets, EMEA, at Goldman Sachs. Froneri brought together two highly complementary players, PAI-owned R&R Ice Cream and Swiss food giant Nestle, but banks had a job selling what was in essence a first-time issuer to the loan market. Although there was some halo effect from Nestle, there was no guaranteeing investor support and it was much more credit-focused. Citigroup, Credit Suisse, Deutsche Bank and Goldman Sachs were joint mandated lead arrangers on the financing, split between a €800m seven-year covenant-lite Term Loan B and a €220m six-year revolver. The deal, alongside a €800m Nestle shareholder loan, was used to repay R&R’s existing high-yield bonds, equalisation payments to the JV parties and fees and expenses. “The credit was the selling point here,” said Ashcroft. “It was a sector which people knew and understood – the bond had worked well and people liked that R&R had a track record.” At launch, the €800m TLB was guided at 350bp over Euribor with a 0% floor and a 99.5 OID. It was not clear from the start how strong demand would be from certain pockets of liquidity. Banks do not usually like investing in covenant-lite term loans and although there were some bank and shareholder relationships at play, they were not the driving force, with more banks entering the deal than initially expected. There was also a large number of managed accounts wanting to invest in the deal. With so much liquidity at play, the banks were able to leverage the high demand to tighten pricing, despite a number of CLOs dropping out. Pricing was finalised at 300bp over Euribor at par, and prior to close banks carved out a €150m-equivalent Australian dollar-denominated tranche that paid 375bp with a 1% floor, to match cashflows. The euro TLB was resized to €650m as a result. More than 170 accounts looked at the deal across Europe, the US and Asia. In total, some 86 entities invested in it, which comprised a split of 30% banks, 55% funds and 15% CLOs, according to Goldman Sachs. “The deal is encouraging for other corporate borrowers to team up with sponsors and tap the leveraged loan market,” said Charles Bennett, managing director at Credit Suisse. To see the digital version of this review, please click here . To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com