Financing Package: Refinitiv's US$13.5bn loan and bond financing

IFR Awards 2018
5 min read
Tessa Walsh

The loan and bond financing backing the carve-out of Refinitiv not only defined 2018, but seemed to hold the fate of the debt markets in the balance. For a successful conclusion to a dramatic saga, the deal is IFR’s Financing Package of the Year.

Much has already been written about Refinitiv, the name that spawned 1,000 terrible puns (not least by IFR). The deal hung over the market from January until September in a nerve-racking nine-month underwrite before it was successfully syndicated in what proved to be a fleeting window of opportunity before the markets turned in October.

“It’s always better to be lucky than good,” said Jonathan Kaufman, the senior managing director who leads Blackstone’s debt markets activities. “We had the benefit of timing and hitting a really good window when we brought it to market in September given what then happened.”

The US$13.5bn loan and bond financing backing a Blackstone-led consortium’s buyout of a 55% stake in Thomson Reuters’ financial data and technology division (and including IFR) was the biggest buyout financing since the financial crisis, and redefined market capacity. With such a high profile, it was also a deal that none concerned could afford to get wrong.

“When we were looking at it this time last year and pulling it together, we were talking about the art of the possible. Any deal of that size if it got hung would affect risk appetite,” Kaufman said.

The deal was more than five years in the making. “It was first structured in 2013. We revisited it in 2016 and took a proposal to Thomson Reuters’ management in the summer of 2017 that laid out the benefits of joining forces. They thought it was a powerful proposal,” said Martin Brand, a senior managing director at Blackstone and the man most responsible for the deal.

The transaction was also one of the year’s least conventional buyouts and most challenging deals due to its aggressive documentation, which was another key theme of 2018, as private equity firms pushed and investors resisted.

Credit research firm Covenant Review said that Refinitiv had some of the weakest investor protections seen since the financial crisis with “defective” sponsor-style covenants “riddled with loopholes”.

“We are aware of our reputation … and try to do the right thing. But if the market is willing to lend with certain flexibility for our competitors, there’s no reason why it would not be the same [for us],” Kaufman said.

Refinitiv’s well-flagged financing allowed investors to reserve capital and meant the deal had a clear run after the summer. The arranging banks and Blackstone timed the deal impeccably and a cautious syndication strategy paid off as the US$5.5bn unsecured bond bridge was sold in June and the debt was pre-marketed in order to find firm anchor orders.

Bank of America Merrill Lynch was lead left on the loans and JP Morgan was sole global coordinator on the bonds.

The syndication went smoothly as investors balanced the need to play in a benchmark deal against Ebitda adjustments and a credit story predicated on cost-cutting.

After a roadshow led by David Craig, the man who was to become Refinitiv’s CEO, the most enthusiastic demand came from loan market investors – in the US in particular – which allowed Blackstone to recut the deal by upping the size of the loans, reducing the bonds – and cutting the yield on both. This saved Refinitiv more than US$92m in interest payments over the life of the financings.

“We surprised ourselves and the market [with] what was do-able in the most cost-efficient way,” Kaufman said.

The loans consisted of a US$6.5bn seven-year Term Loan B (originally US$5.5bn) and a US$2.75bn-equivalent euro-denominated Term Loan B (originally US$2.5bn). Both tranches had an OID of 99.75, compared with guidance of 99–99.5 and traded well on the break.

The US dollar loan was priced at 375bp over Libor, inside guidance of 400bp–425bp and the euro loan at 400bp over Euribor, compared with original guidance of 425bp.

The US$1.25bn senior secured bond was priced at 6.25%, compared with guidance of low 7%, while the €860m senior secured bond was priced at 4.5%, compared with 5% area. Both bonds mature in May 2026.

US$1.575bn of unsecured bonds were priced at 8.25%, compared with initial talk in the low 9% area, and €365m of unsecured bonds were priced at 6.875%, compared with talk of around 7%. Those bonds mature in November 2026.

The loans are rated B2/B/BB, while the bonds are rated B2/B/BB+ (secured tranches) and Caa2/B–/B+ (unsecured).

The debt financing also includes US$1bn of preferred equity, which has a 14.5% PIK coupon, plus a US$750m revolving credit facility.

“We are very excited about the future of Refinitiv. It’s an incredible business that we’re excited to own, invest in and accelerate,” Brand said.

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Financing Package: Refinitiv's US$13.5bn loan and bond financing