March 17, 2017 / 12:02 PM / in 4 months

LPC-Lenders welcome US$10bn mega-loans

3 Min Read

LONDON, March 17 (Reuters) - Leveraged loan investors are set to welcome two sizeable cross-border acquisition deals totalling US$11.5bn, which will offer some relief from the raft of refinancings that have dominated both the US and European markets since the start of the year.

Banks have underwritten around US$6bn of debt financing to back investment firm Vista Equity Partners’ acquisition of Canadian fintech DH Corp (and the refinancing of existing debt) as it combines DH with portfolio company UK financial software provider Misys.

Meanwhile, lenders are preparing to launch a US$5.5bn-equivalent leveraged loan to back UK software company Micro Focus International’s acquisition of Hewlett Packard Enterprise’s software business.

“The market has been crying out for big new deals and the European market can absorb somewhere like €2bn per deal, so I think they will provide a welcome fillip to the market,” a syndicate head said.

The deals are expected to come at around the same time and although one senior European loan banker said that could be tantamount to a “head-to-head celebratory death match”, most bankers are confident there is enough capacity to soak up both deals.

The leveraged loan investor-base has been flooded with cash from new and existing CLOs, warehousing CLOs and managed accounts.

Having seen a number of repricings and refinancings on existing deals, investors are desperate to put new money to work and access fresh paper.

“It would be nice to just have some paper to use new money. The market is not even close to capacity and it still feels like most supply is coming from small add-ons, refinancings and recaps. Around 15 to 20 big fund managers are sitting on a lot of cash and it feels like we need €15bn of new money to come to market to soak up liquidity and normalise the technical dynamic - and that is just in Europe,” a senior leveraged loan banker said.

Barclays, Citigroup and Morgan Stanley are leading the debt financing on DH/Misys, alongside Nomura and Macquarie, which joined the deal.

Some US$6bn of debt could include around US$4bn of senior debt financing and around US$2bn of subordinated. The financing will be mainly denominated in dollars but will include some euros or sterling to take account of the company’s cashflows. The financing could be solely in loans or could include both loans and bonds.

A US$5bn term loan for Micro Focus will include around €1bn for European investors. There is also a US$500m revolver. JP Morgan has been joined by Barclays, HSBC and RBS on the deal. (Editing by Christopher Mangham)

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