November 8, 2019 / 3:39 PM / 3 months ago

Banks forced to rethink Cobham loan selldown

LONDON, Nov 8 (LPC) - Bankers are reconsidering the selldown strategy of a £2.517bn financing backing a £4bn buyout of UK defence and aerospace group Cobham after the British government further delayed the acquisition.

Banks were preparing to launch syndication of the jumbo financing within the next two weeks and it was touted to be the last of the mega event-driven financings of 2019. Lenders were expecting to have it wrapped up by the beginning of December.

That timetable is now under consideration after government Business Secretary Andrea Leadsom announced further discussions were needed over the acquisition.

A number of bankers attribute the delay to an upcoming general election on December 12, speculating that the government could come under attack for allowing the sale of a sensitive UK asset to a US firm.

“Clearly if this delay had not occurred the debt would likely be out for syndication but now it will have to be reconsidered. A decision on the acquisition seems to be punted to after the election. They don’t want a decision to be a political football and easy for the opposition to use,” a senior capital markets banker said.

US private equity firm Advent agreed to buy Cobham, known for its air-to-air refuelling technology, in July.

Credit Suisse, Citigroup and Goldman Sachs underwrote the debt financing and were joined in August by Blackstone Holdings Finance, BNP Paribas, Deutsche Bank, UniCredit, NatWest Markets and Barclays as arrangers and underwriters.

On September 17 Leadsom initiated a public interest intervention under the Enterprise Act 2002 into the merger on the grounds of national security. The Competition and Markets Authority provided her with a report on the transaction by October 29. The Secretary of State for Defence also wrote to her about the national security implications.


Lenders may decide to wait until there is more clarity on the M&A process before launching a sell-down or they could still go ahead with the syndication process. Banks don’t favour holding risk over year-end, uncertain what January will bring from a political and economic point of view.

“There is a referral outstanding that could theoretically change the transaction. What lenders want and what they can do is not the same thing. Banks would rather not hold loans over year-end if they don’t have to, but if they don’t know what the deal is for whatever reason, they almost have no choice. The fact it has been delayed again doesn’t suggest an easy outcome,” a second senior banker said.

The financing comprises £1.985bn-equivalent of senior facilities, including a £1.71bn-equivalent seven-year Term Loan B paying 450bp, with a 0% floor on the euros and a 1% floor on the US dollars and a £275m 5.5-year multi-currency revolving credit facility.

There is also a £532m-equivalent second-lien facility, some or all of which has been preplaced. Bonds are also thought to have been included in the capital structure, sources said.

Ticking fees on the TLB and second lien start at 50% of the applicable margin after 60 days from final allocation rising to 100% after 120 days. (Editing by Christopher Mangham)

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