Biopharmaceutical company Bristol-Myers Squibb’s US$33.5bn bridge financing was a master-class in executing a large acquisition facility.
The bridge loan financed Bristol-Myers’ US$74bn purchase of Celgene, combining two of the world’s largest cancer drug businesses in the biggest pharmaceutical deal ever. At the time it was the sixth-largest US bridge loan on record, and the second-largest in the US healthcare segment.
“It really speaks to how we do business, and really try to serve our client’s objectives. That’s our number one priority in anything that we work on,” said Anish Shah, global head of investment-grade acquisition finance at Morgan Stanley.
Morgan Stanley underwrote the loan in its entirety through its joint venture with MUFG, which was critical to preserving confidentiality.
“We really have a market-differentiating agreement with MUFG where we can bring them in to complement our balance sheet and deliver our clients what is really unprecedented balance-sheet capacity,” Shah said.
Given the size and magnitude of the takeover, funding certainty at the time of the acquisition announcement was critical for all parties involved. However, the deal did face some headwinds as it came to market in January 2019 at a time of heightened volatility in the debt markets caused by the US-China trade war, rising interest rates and the potential for economic slowing in the US.
The bridge loan was structured with unique features, including a cost-effective mechanism to backstop balance sheet cash used to fund the acquisition.
Syndication was highly successful and completed within two weeks.
In order to maximise capacity in the bank market, Morgan Stanley concurrently arranged one of the largest ever term loans for a Single A rated company.
It comprised a US$1bn 364-day tranche, a US$4bn three-year tranche and a US$5bn five-year tranche and the bespoke execution ensured that Bristol-Myers would have its liquidity needs adequately met in the short term, providing repayment flexibility and protection from capital markets shifts.
A new US$1bn three-year revolver refinanced the company’s existing US$2bn 364-day RCF.
By tapping a diverse group of existing relationships and new lenders across the US, Europe and Japan, the company achieved a highly successful execution.
“The trick for syndicating a term loan in size for an investment-grade company is really approaching it in a customised basis and not a one-size-fits-all strategy. What we did was very targeted,” Shah said.
“We worked really methodically with our loan sales force to identify those pockets of demand that were high-quality counterparties.”
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