By Alasdair Reilly and Tessa Walsh
LONDON (Reuters) - AB InBev (BR:ABI) is backing its $100 billion-plus (65.73 billion pound-plus) bid for SABMiller (L:SAB) with a record $75 billion syndicated loan, which is the largest commercial loan in the history of the global loan markets, adviser to the lenders Allen & Overy said on Wednesday.
The financing has been agreed with AB InBev's key relationship banks, including Banco Santander (MC:SAN), Bank of America (N:BAC) Merrill Lynch, Bank of Tokyo-Mitsubishi UFJ, Barclays (L:BARC), BNP Paribas (PA:BNPP) and Deutsche Bank (DE:DBKGn).
"AB InBev's ability to raise $75 billion in the loan markets in the space of a few weeks shows that banks are still willing to support top-class borrowers in record amounts, despite the current era of increased regulatory and capital costs," Allen & Overy partner Nicholas Clark said.
To help win regulatory approval for the takeover, AB InBev has also reached an agreement to sell SABMiller's 58 percent stake in U.S. joint venture MillerCoors to the venture's other shareholder, Denver-based Molson Coors (N:TAP), for $12 billion.
Molson Coors is backing the acquisition with a fully committed debt financing from Citigroup (N:C), Bank of America Merrill Lynch and UBS, the company announced on Wednesday.
The size of AB InBev's loan eclipses the previous record which was held by Verizon Communications (N:VZ), which raised a $61 billion bridge loan in 2013 to back its purchase of the remaining 45 percent stake in Verizon Wireless that it did not already own, according to Thomson Reuters LPC data.
Unusually for a multibillion dollar acquisition loan, AB InBev arranged the loan itself, using its treasury team to assemble the group of relationship banks, people familiar with the situation said.
Self-arranging the loan allowed AB InBev to reduce its borrowing costs by cutting fee payments to lenders, a senior banker said.
LOAN STRUCTURE
The financing comprises a $25 billion three-year term loan with a one-year extension option; a $10 billion five-year term loan; a $10 billion one-year disposals bridge facility, a $15 billion one-year bridge to cash/bond facility; and a $15 billion one-year bridge to cash/bond facility with a one-year extension option.
The weighted average cost of the financing is 110bp over Libor, based on the initial starting margin.
Proceeds from the Miller Coors transaction will be used to repay the disposals bridge, then in turn to repay the one-year bridge and extendable one-year bridge.
AB InBev's long term capital structure target remains a net debt to Ebitda ratio of approximately 2.0 times.
The company primarily syndicated the loan in London and New York, leveraging its relationships with its core European lenders and new lending relationships that the company has built since it acquired Anheuser-Busch in 2008, the people familiar with the situation said.
AB InBev launched its offer for SABMiller on Wednesday. The takeover would be the largest ever UK M&A transaction and one of the largest mergers in corporate history.
Molson Coors acquisition is conditional on the closing of AB InBev's acquisition of SABMiller and will be financed from cash flow, new debt and equity, with an expected financing split of 75-80 percent debt and 20-25 percent equity.
Molson Coors is committed to retaining its investment grade rating.
(This version of the story corrects maturity of bridge loan to one year from two years in paragraphs nine and 11)