In another sign that the credit freeze on big deals is beginning to thaw, the eight banks sitting on £9 billion in hung buyout financing for Alliance Boots sold off some of the first- and second-lien loans to investors. Further sales are likely to arrive by the end of the month, according to banking sources close to the deal.
The banks could announce the sale of just under half of the £9 billion ($17.55 billion) buyout loan, which was stranded in mid-2007 by the credit crunch, as early as May 26, sources said. Mega-firm
“The good news is that something is coming together. We have a number of outright cash bids in and levered bids,” a syndicate head said.
The eight banks have already sold some of a €2 billion ($3.10 billion) carve-out of the first-lien loan that was shown to institutional investors earlier in the month, sources said.
The leads also sold around £2 billion of the company’s first-lien loan to a consortium of credit opportunity funds raised by LBO firms
The arranging banks also sold around £600 million of Alliance Boots’s second lien to Goldman Sachs’s mezzanine fund in a single cash sale at 85 percent of face value, sources said.
The sale of the first- and second-lien loans were so successful that some of the eight banks decided not to sell at all, sources said.
The sales were executed with no investor protection, known as “Most Favoured Nation” status, which was a sticking point of earlier negotiations. The bids received were a mix of cash and leveraged bids, that require the seller to provide financing to the buyer.
Cash sales are preferable as they are cheaper for the bank sellers, but some banks have offered leveraged to private equity buyers buying large £500 million chunks, sources said. It’s not clear whether the buyout firm buyers will use existing financing lines or whether the arranging banks will provide new financing on a single name basis, sources added.
Debt for the deal came from eight banks: Deutsche Bank, JPMorgan Chase, UniCredit (HVB), Barclays Capital, Citi, Bank of America, Merrill Lynch and Royal Bank of Scotland.
(Reporting by Reuters news service.)