Banks that do Bridge LoansBridging loan banks
IPC: LPC: Creditors want to accept a Broadcom Bridge loan Rekord
As credit in support of high value merger and acquisition activity fell 18% this year compared to the same 10-month period last year, banks said they hoped this transaction would materialise and create the conditions for more deals to flow. Broadcom was quoted by five banks - Bank of America Merrill Lynch, Citigroup, Deutsche Bank, JP Morgan and Morgan Stanley - as saying that they were "very confident" that they would be able to provide the $130 billion worth of funding, plus debts, required for a buyout.
S&P rates Broadcom BBB- and Moody's Baa2. These tactics, often used in large enemy buyouts, allow the borrower to evade charges for money tied up by banks for a large transaction that may not be taking place. The banks do not immediately bind their balances and signal to the market that the funding will take place if the transaction is cleared.
"We talked about when the first $100 billion dollar deal would come for a while," one bankier said, saying that there is enough interest to raise funds of this magnitude. Concrete financial schedules for the transaction are not yet clear. Freeman Consulting Services says that with an early bridge facility of around USD 100 billion, the advance payments to the organising banks would be at least USD 100 million - and possibly much more.
Later, if about USD 100 billion in investment-grade debt were spent, banks would make an extra USD 400 to 600 million in insurance commission. Bridging finance is expected to surpass the $75 billion US dollar credit that supported the acquisition of SABMiller by the Belgian AB InBev brewery in 2015. The $61 billion bridge credit from Verizon Communications in 2013 to purchase the Verizon Wireless interest that Vodafone does not yet own is the second largest such business in the world and the single most significant U.S. bridge credit.
Bayer, the leading pharmaceutical and chemicals group in Germany, has supported its acquisition of the U.S. seeds business Monsanto with a USD 57 billion bridge credit, the third largest credit. A large new debenture would probably become part of indices that use investor benchmarking, and therefore require investor engagement, several analysts said.
Together with borrowings, the long-term funding is likely to involve short-term loans with different terms, which will help credit ratings firms secure the merger company's leverage reduction plan, the bankier said. As well as the very confidential correspondence from the first banking group, Silver Lake Partners undertook to make US$5 billion in exchangeable notes available to Broadcom.
While a number of fusions are being delayed and the debate on US fiscal policies is escalating, Broadcom is moving into focus.