By Max Bower
LONDON (LPC) - Refinitiv, Thomson Reuters’ Financial and Risk (F&R) division, has launched price guidance on its US$8bn-equivalent term loan B after a bank meeting on Tuesday morning.
The seven-year term loan B comprises a US$5.5bn facility and a US$2.5bn-equivalent euro-denominated facility. Price guidance on the dollar loan is 400bp-425bp over Libor and the euro loan is guided at 425bp over Euribor.
The deal is the largest buyout financing since the financial crisis, and its launch has been eagerly awaited since the deal was underwritten in January. The size of the deal means that it has been priced to attract support in the leveraged loan markets on both sides of the Atlantic.
“The banks had no choice but to price it attractively and it’ll be interesting to see how it goes,” an investor in London said.
The deal is being marketed with leverage of 4.25 times secured and 5.25 times unsecured, based on adjusted Ebitda of US$2.5bn which includes US$700m of cost savings and synergies from the business’s reported Ebitda of US$1.8bn.
In order to buy the deal, investors have to buy into the adjustments and cost savings forecast, the first investor said. A portfolio manager in London said that he had calculated that leverage for the deal is “nearer six and seven times”.
Senior managing director at Blackstone (NYSE:BX) Martin Brand said at Tuesday’s bank meeting that some US$250m of the costs forecast will be made in the three months after the acquisition closes, primarily through technology savings such as a “server virtualization”.
“Blackstone made a fair point that this deal has been in gestation for a long time and so they know almost down to the individual headcount what they’re going to do,” the portfolio manager said.
Brand said that Blackstone is the biggest investment bank fee payer on Wall Street, at over US$1bn a year, and is also the largest provider of capital to the hedge fund industry, which will help Refinitiv to gain further traction with financial institutions and grow the business.
Refinitiv currently spends up to US$500m a year on capital expenditure, which Refinitiv executives said at the bank meeting is expected to fall after the acquisition which will boost free cash flow.
“It is sometimes strange with these very large transactions as investors almost make the decision at the beginning that they’re going to do it,” the portfolio manager added. “Often when you drill down into the business though you realize it’s actually not an easy story.”
David Craig, president of F&R and future CEO of Refinitiv, said at the bank meeting that much of the hard work was behind the company, as previous price reductions had now been absorbed and its restructuring was complete.
TERMS DETAILED
The dollar 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.
Neither tranche has a financial covenant. The facility amortizes 1% a year.
Commitments are due on September 17.
Bank of America Merrill Lynch (NYSE:BAC), 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.
Blackstone announced on January 30 that it was buying a 55% majority stake in Thomson Reuters’ F&R unit, which includes IFR. The unit will be renamed Refinitiv.
Expected Corporate Family Ratings are B3/B/BB, while expected secured ratings are B2/B(RR 3)/BB+ (RR 2).