In a year that saw several billion-dollar leveraged buyouts, J.P. Morgan Chase & Co. held its spot at the high rollers table, managing 249 leveraged loan issues in 2002 for more than $88 billion. The firm was involved in several large-market LBOs of the year, including QwestDex East ($2.75 billion), Burger King ($1.5 billion), Jefferson Smurfit, Swift & Co., Brake Bros. and Berry Plastics, among others.
While the bank was involved in fewer overall deals than its closest competitor, Bank of America, J.P. Morgan placed more debt in the market overall, and was the top book manager based on loan volume.
“The key reasons we have a leadership position are our long-standing client relationships and experienced client coverage and leverage finance professionals. Many of us have over 15 years of experience doing this business, and our clients repeatedly call on us to execute their largest, most difficult or complex deals,” said Douglas Traver, managing director and co-head of syndicated and leverage finance.
Perhaps no deal was more impressive than its participation in Welsh, Carson, Anderson & Stowe and The Carlyle Group’s $2.75 billion purchase of QwestDex East, one of the telephone directories units that was sold by Qwest Communications. (The QwestDex West feature of the deal is expected to close in 2003.)
The landmark deal was originally launched in April 2002, but underwent months of creative debt and equity restructuring before the seller came into agreement. When completed, J.P. Morgan had lead managed $1.4 billion, split between two credit facilities, and a $975 million high-yield bond.
The original QwestDex deal was split into parts, for regulatory reasons, and because “dealing with two smaller deals is much easier than one large deal,” according to a banker who worked on the transaction.
“From a distribution focus, it is easier to complete two deals rather than one large deal,” the banker added. “Qwest needed cash quickly, and this was a good way for everyone to benefit.”
J.P. Morgan, along with Citigroup, underwrote the debt facilities for the $1.5 billion Burger King LBO. Sponsoring that buyout was Texas Pacific Group, Bain Capital and Goldman Sachs Capital Partners.
The facilities were split into a $100 million and a $750 million five-year term loan. As the deal is guaranteed by Diageo plc, it features corporate-style margins of 45bp over Libor. There is also a $100 million revolver, with subordinated debt facilites of $25 million.
Looking ahead, J.P. Morgan has ambitious plans for the upcoming year, during which the healthy pace of LBO volume is expected to continue. Just last week, JP Morgan helped manage the financing for the sale of TRW’s automotive division, which included $1.6 billion of high-yield bonds and a $1.8 billion loan. Other co-leads were CSFB, Lehman, Deutsche Bank and BofA.