September 13, 2018 / 8:34 AM / a month ago

Refinitiv's $8 billion buyout loan oversubscribed

LONDON (LPC) - The $8 billion term loan backing Blackstone’s purchase of a 55% stake in Refinitiv, Thomson Reuters’ (TRI.TO) Financial and Risk (F&R) division is oversubscribed and is expected to price at the tight end of guidance after a strong response from the US market, bankers said.

The deadline for loan responses was accelerated to Friday from an original deadline of September 17. Books on the US dollar high-yield bonds are also oversubscribed and could price earlier than scheduled on Friday.

“We’re thrilled with how it’s going. It really sets the tone for the remainder of the year,” a senior loan banker said.

The $8 billion seven-year term loan B, which includes a US$5.5billion facility and a $2.5 billion-equivalent euro-denominated facility is expected to price at around 400bp at the tight end of guidance, investors said. Price guidance on the dollar loan was originally 400bp-425bp over Libor and the euro loan was guided at 425bp over Euribor.

One banker said that the loan could even price at 375bp, but this is seen as unlikely as some investors could drop out at that level. Pricing at the higher level could help secondary trading.

“I think they will have a hard time flexing it down dramatically because I think a lot of investors have a view that it should be priced no lower than 375bp. In fact, I think a lot of investors might drop out at 375bp,” an investor said.

The $5.5 billion equivalent high-yield bond financing includes two US dollar tranches: a $2 billion 7.5-year non-call three senior secured first-lien bond and a $1.8 billion eight year non call three senior unsecured bond. The last official update to the market was that the bond would price next Tuesday.

US RESPONSE

The response for the loans and the bonds has been stronger from the US market and the euro pieces of the debt financing could be scaled down or reduced, sources said.

Investors with cash to deploy that need to buy indexed deals like the credit and are buying in bulk, but smaller investors who are more focused on yield are less interested.

“It’s such an easy loan to buy as a loan investor. There are so many little jewels within the firm. Even if one part of the firm falters it’s not correlated necessarily with another part of the firm. It’s a really good credit story,” the first banker said.

Investors are comfortable with Refinitiv’s ability to generate cashflow and the stability of the business, but have voiced concerns over the loan covenant package. Most of the focus has honed in on asset sale provisions, restricted payment baskets and additional indebtedness in addition to aggressive Ebitda adjustments.

“It’s not about price. Investors just want a better covenant package,” a second senior banker said. “What you’re seeing is just a more balanced market where investors do have the ability to influence some of the terms,”

Bank of America Merrill Lynch, JP Morgan, Citigroup, Wells Fargo, Morgan Stanley, Goldman Sachs, UBS, Credit Suisse, HSBC, Deutsche Bank, Barclays, Royal Bank of Canada and Sumitomo are the lenders. BAML is left lead on both TLBs.

The dollar loan tranche has no floor while the euro has a 0% floor. Both are offered at 99-99.5 and have six months soft call protection at 101. The facility amortizes 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.

Writing by Tessa Walsh; Editing by Christopher Mangham

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