Banks are trying to siphon off an $80 billion debt hangover from the M&A boom

Global banks, stuck with $80bn (€80.1bn) of unattractive M&A financial debt, are trying new tactics to find buyers.

In the case of the Citrix Systems private equity buyout, they cut the debt into smaller chunks to attract a larger pool of investors.

Euro debt is added to some financing packages, as in the case of the ETC Group acquisition.

Optimizations are being considered for deals across the industry, including CVC’s acquisition of Unilever’s tea business and Bain Capital’s acquisition of French computer services company Inetum SA.

“Given current market conditions, we have seen a number of deals where underwriters have changed the capital structure or terms to maximize liquidity,” said Nicholas Clark, partner and co-head of the global leveraged finance group at the law firm Allen & Overy.

“The underwriters have attempted to tighten the terms up front to try to address potential investor focus points in the documents.”

In doing so, the industry is adjusting to the current investment climate, in which risk-taking has disappeared and money managers elsewhere are being hurt by bad bets. Many of these M&A funding packages were completed months ago when stocks were trading near all-time highs.

However, there is often a limit to how much banks can switch. They are still bound by acquisition deals and must renegotiate any new terms with the private equity firms.

In the case of the Wm Morrison Supermarkets acquisition, the banks applied for permission to convert part of the term loan into dollars to attract a broader investor base, but Clayton, Dubilier & Rice – the retail chain’s private equity buyer – didn’t approve it Request, according to people familiar with the matter, who asked not to be identified.

Some of the Morrison loans have been sold to Asian banks and commercial banks, as well as to Pimco and other investors.

Despite these efforts, the banks involved in the deal are left with more than $1 billion in funding.

Bloomberg

https://www.independent.ie/business/banks-look-to-shift-80bn-debt-hangover-from-m-and-a-boom-41932775.html Banks are trying to siphon off an $80 billion debt hangover from the M&A boom

Fry Electronics Team

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