The US debt market has been less than enthusiastic so far towards the jumbo financing for the US$11.3bn buyout of data storage company SunGard by Silver Lake Partners, Bain Capital, TPG, Blackstone, Goldman Sachs Capital Partners, Providence Equity Partners and KKR.
The seven firms are jointly writing a US$3.5bn equity cheque, which equates to roughly 30% of the price tag. They approached JP Morgan, Deutsche Bank and Citigroup to arrange financing for the deal. These banks have been quietly pre-marketing the loans to gauge interest before a formal launch. Goldman Sachs and Morgan Stanley have since joined the syndicate.
At US$4bn, the term loan is one of the largest-ever senior debt facilities to have emerged in the global market. The US debt markets are also growing more risk-averse, with both loans and bonds pricing wide of talk.
“The market is tumultuous; new issue LBOs have taken a hiding in the high-yield bond market,” said Dan Toscano, Deutsche Bank’s head of senior debt capital markets for the Americas. “The first-lien loan market is in fairly good shape, but there is not that much normal LBO activity coming to market. We are seeing more stand-alone financings.”
The US second-lien loan market has priced off by about 100bp, according to bankers, because hedge funds are in retreat.
The SunGard deal also includes a US$1bn revolver that has a tenor of six years, while the term loan matures over 7-/2 years, according to a 14A proxy statement. The financing package will also include a US$3bn bridge to high-yield bond. Deutsche, Citigroup and JP Morgan will run the bond. Under the terms of the agreement, there is also a provision to place up to US$500m of debt at the holding company.