By Jonathan Schwarzberg
LONDON (LPC) - The term loan financing backing private equity firm Blackstone’s purchase of a 55% stake in Refinitiv, Thomson Reuters’ (TO:TRI) Financial and Risk (F&R) division has been increased to US$9.25bn (7.03 billion pounds) from US$8bn and the high-yield bonds have been reduced.
A strong response from the loan market, particularly from the US also allowed pricing to be cut, and relatively minor investor-friendly changes to be made to the documents.
The deal, which is the biggest buyout of the year and the largest to be completed since the financial crisis, will price and allocate on Tuesday.
The successful conclusion of the jumbo new-money loan is expected to set a positive tone for the market until the end of the year, bankers said.
"I think the market surpassed our most optimistic expectations, this is a move you only see in extraordinarily strong books. Blackstone (NYSE:BX) gets the best of the best in terms of terms,” a banker said.
The seven-year term loan B financing now comprises a US$6.5bn facility, which has been increased from US$5.5bn, and a US$2.75bn-equivalent euro-denominated facility, which was upped from US$2.5bn. The strength of the US response saw the dollar tranche pricing inside the euros.
The dollar tranche is now priced at 375bp over Libor, down from guidance of 400bp-425bp, while the euro loan is priced at 400bp over Euribor, lower than guidance of 425bp. Both tranches are now offered at a 99.5 OID from guidance of 99-99.5.
FURTHER CHANGES
The strength of demand for the deal has limited the changes that had to be made to the deal's documentation. The jumbo loan was originally viewed as aggressive, as it included borrower-friendly features including controversial Ebitda adjustments based on cost savings.
“It’s not drastic surgery. The whole thing is not more lender friendly, it's had tweaks around the edges on some of the baskets and clauses. Even after modest tweaks, it still feels like an aggressive document,” a London-based investor said.
Margin ratchets, which are more common in Europe than the US, have been removed and the language on adding incremental debt has been slightly improved.
The Most Favoured Nation sunset provision has been extended months from six months to avoid affecting the price of existing loans if Refinitiv opts to issue additional debt.
The amount of incremental debt permitted has been revised to the larger of US$2bn, or 80% of the total consolidated Ebitda in the last 12 months, from US$2.435bn, or 100% of Ebitda.
The covenant restricting consolidated first lien net leverage ratio was increased slightly by 0.2 times to account for asset sales and using excess cash flow to repay debt and was also increased by the same amount for the incremental loan covenant.
The consolidated secured net leverage ratio was also increased by 0.2 times for similar purposes.
Bank of America (NYSE:BAC) Merrill Lynch, JP Morgan, Citigroup (NYSE:C), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS), UBS, Credit Suisse (SIX:CSGN), HSBC, Deutsche Bank (DE:DBKGn), Barclays (LON:BARC), Royal Bank of Canada and Sumitomo are the lenders. BAML is left lead on both TLBs.
The loans have six months soft call protection at 101. The facility amortises at 1% a year.
Blackstone announced on January 30 that it was buying a 55% majority stake in Thomson Reuters’ F&R unit, which includes LPC. The unit will be renamed Refinitiv.
Corporate family ratings are B3/B/BB, while facility ratings are B2/B/BB. The acquisition is scheduled to close on October 1.