North America Loan: Molson Coors Brewing’s US$12.3bn acquisition loan

IFR Review of the Year 2016
3 min read
Michelle Sierra

Get the beers in

In November 2015, Molson Coors Brewing announced that it had entered into a definitive agreement with Anheuser-Busch InBev to purchase SABMiller’s 58% stake in Miller Coors, the joint venture formed in the US by SABMiller and Molson Coors in 2008.

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.

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