Blackstone starts marketing huge F&R buyout loan

By Yun Li and Michelle Sierra

NEW YORK (LPC) - The $8 billion-equivalent term loan B portion of the debt financing backing Blackstone Group’s $20 billion acquisition of a 55 percent stake in Thomson Reuters’ Financial and Risk (F&R) unit is being shown to large institutional investors before an anticipated September launch, sources said on Monday.

The $13.5 billion financing, which includes loans and bonds, is being led by JP Morgan, Bank of America Merrill Lynch and Citigroup and is the largest buyout financing since the financial crisis.

The jumbo buyout loan is currently being premarketed and is expected to formally launch soon after Labor Day, which will be celebrated on September 3 in the United States, two sources said.

“It’s a huge deal, they (banks) are trying to gauge interest,” a source close to the transaction said.

Blackstone (:BX.N) announced on January 30 that it was buying a majority stake in Thomson Reuters’ (Toronto:TRI.TO - News) F&R unit, which includes LPC and IFR.

The acquisition is expected to close in September or October, after regulatory requirements made a targeted July 1 close date look increasingly unlikely.

The private equity firm was able to command favorable financing terms when the deal was underwritten in January, but the leverage finance market has softened in the interim, which makes placing a jumbo buyout loan more challenging.

The F&R financing includes step-ups in market flex terms and debt caps to give banks additional protection as investor opposition to aggressively priced and structured deals grows, sources said.

“They have gotten some accounts to look at it already, trying to get some feedback on the structure,” a loan trader said.

The huge deal will also have to compete with other large US buyout financings that are expected to launch after Labor Day, including the $9.9 billion buyout of healthcare and national hospital based physician service Envision Healthcare (:EVHC.N).

Blackstone declined to comment. JP Morgan and BAML declined to comment. Citi did not immediately return a request for comment.

DEAL STRUCTURE

The term loan B is split between US$5.5bn and US$2.5bn-equivalent in euros. The financing also includes $3 billion-equivalent of secured bonds, split between $2 billion and $1 billion-equivalent in euros, and $2.5 billion-equivalent of unsecured bonds, split between $1.8 billion and $700 million-equivalent in euros. The company will also place a $750 million revolving credit facility.

Wells Fargo, Morgan Stanley, Goldman Sachs, UBS, Credit Suisse, HSBC, Deutsche Bank, Barclays, Royal Bank Canada and SMBC have joined the deal as joint lead arrangers, a second source familiar with the deal said.

Other banks that are expected to have joined the deal include MUFG, Mizuho, Societe Generale, Standard Chartered, Natixis, BMO, Toronto Dominion, Unicredit, Intesa Sanpaolo, ING and Jefferies.

Additional funding comes from $1 billion in preferred equity – with a 14.5 percent Payment-In-Kind (PIK) coupon – $3 billion of cash equity that Blackstone is contributing, and $2.5 billion of existing equity, based on the $20 billion valuation, that will be rolled over.

Leverage is expected to be around 4.5 times through the secured debt and 5.6 times total debt after Ebitda adjustments, which could be as much as 30 percent, as the transaction is a carve-out and involves reallocating costs, LPC previously reported.

The size of the debt and leverage currently imply Ebitda of about $2.4 billion, including around $650 million of cost savings, based on the last 12 months’ Ebitda of approximately $1.7 billion for the F&R unit.

The currency splits and Ebitda figures may change depending on investor demand and the timing of the wider institutional syndication.

(Additional reporting by Jonathan Schwarzberg in New York; Editing by Tessa Walsh)