IFR 03.08.2019

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BNPP to take on hundreds of DB staff

„ People & Markets French bank could pick up half of prime brokerage unit’s balances

BY CHRISTOPHER SPINK

BNP PARIBAS is making progress

with its plan to take on the bulk

of DEUTSCHE BANK’s prime

brokerage and electronic

equities business.

Under the arrangement

announced on July 7, Deutsche

said it wanted to pull out of the

sector entirely, as part of its

wider restructuring, but will

refer clients to the French bank

if they want to keep using its

systems.

As part of the deal BNPP will

take on the technology platform

and around half of Deutsche’s

prime brokerage balances, and

absorb as many as 600 Deutsche

employees to maintain the service.

“This is a good deal for

everyone. Under the referral

agreement clients can continue

to use the same system,” Philippe

Bordenave, chief operating

OFlCERûATû".00ûTOLDû)&2

Precise details on the total

level of balances held by

Deutsche’s prime brokerage

have not been released.

However, the German bank

said €170bn of equities assets

will be put in its new capital

release unit, some of which

may end up being moved to

the French lender. The unit

will contain €288bn of assets

altogether, which will be sold

or wound down.

)TûISûUNLIKELYûTHATûALLûOFû

the balances will transfer to

BNPP. Many hedge funds

and other clients use several

prime brokers and could

simply move business to other

providers.

Barclays is also looking to take

US$20bn of the assets, according

to people familiar with the

situation, including US$10bn

from one client with whom it

already has a relationship.

Deutsche’s equities trading

system is highly regarded and is

considered an attractive European

alternative to the service offered

BYûTHEûlVEûMAJORû53ûBANKS

BNPP hopes to maintain that

difference by taking on the

mantle of the European

alternative.

LSE nets US$13.5bn for Refinitiv buy

„ Loans/Bonds Bridge loan refinances LBO financing just 10 months after Blackstone-led buyout

BY TESSA WALSH

LONDON STOCK EXCHANGE GROUP has

agreed an underwritten bridge

loan of around US$13.5bn to

support its agreed US$27bn

acquisition of REFINITIV. The loan

WILLûRElNANCEûTHEû53BNûOFû

leveraged loans and bonds that

backed the US$20bn purchase of

AûMAJORITYûSTAKEûINûTHEûDATAû

company 10 months ago by a

consortium led by US private

EQUITYûlRMû"LACKSTONE

The bridge loan is intended to

be taken out entirely by bonds,

but not until the fourth-quarter of

NEXTûYEARûORûEVENûTHEûlRST

QUARTERû

of 2021, according to one person

involved in the deal. That timing

will be determined by the close of

the acquisition. Syndication of the

bridge loan is expected to close by

the end of August.

The acquisition, which will be

lNANCEDûWITHûNEWLYûISSUEDûSHARESû

WILLûREPLACEû2ElNITIVSûEXISTINGû

leveraged debt with a corporate

lNANCINGûREmECTINGû,3%Sû

investment-grade credit rating.

4HEûDEALûALSOûHASûSIGNIlCANTû

implications for the credit markets

as it will funnel a wall of liquidity

back into the leveraged loan and

high-yield bond markets if and

when the deal closes in 2020,

which could support aggressive

conditions in the interim.

Another €10bn repayment of

DEBTûOWEDûBYû)TALIANûTELECOMûWIND

was also announced on Thursday,

which will further boost liquidity

and continue to support a

technical market where excess

demand is chasing limited supply.

h)TûWASûAûSURPRISEûTOûLOSEû

2ElNITIVûSOûQUICKLYvûAûSENIORû

LOANûINVESTORûSAIDûh2EPAYMENTûISû

not great and Wind is getting

REPAIDûTOOû)NûANûALREADYû

overheated market this is not a

good recipe for market discipline.

)TSûAûBORROWERSûDREAMv

4HEû2ElNITIVûBRIDGEûLOANûHASû

been underwritten by Barclays,

Goldman Sachs and Morgan Stanley,

which have launched

syndication of the deal.

4HEûJUMBOûBRIDGEûLOANûWILLû

cover the mandatory repayment

of the existing loans and bonds

triggered by change of control

provisions.

2ElNITIVSûDEBTûWILLûBEûREPAIDû

when the deal is approved by

regulators and closes, which is

EXPECTEDûINû

ûMONTHSû)FûTHEû

ACQUISITIONûISûNOTûAPPROVEDû,3%û

WILLûPAYû2ElNTIVûAûTERMINATIONû

fee of £198.3m.

2ElNITIVûTHEûPARENTûCOMPANYû

OFû)&2ûWASûCREATEDûLASTûYEARûWHENû

a Blackstone-led consortium

bought a 55% stake in Thomson

2EUTERSû&INANCIALûû2ISKû

business in the largest leveraged

BUYOUTûSINCEûTHEûlNANCIALûCRISISû

4HOMSONû2EUTERSûOWNSûTHEû

remaining 45% stake.

INVESTOR DISMAY

,OANSûAREûAûPREPAYABLEû

instrument, and investors are

dismayed to lose a key asset only

months after doing extensive

and time-consuming credit

analysis to book the asset.

,ENDERSûWILLûRECEIVEûLITTLEûUPSIDEû

ASûTHEûJUMBOûDEALûWASûALREADYû

trading close to par in the

secondary loan market.

h,OANûHOLDERSûWILLûBEûANNOYEDû

if they lose a large loan and they

like the credit risk. The fact it

was trading near par means

there is no great gain either,” a

loan investor said.

The secondary price of

2ElNITIVSûEURO

DENOMINATEDû

loan climbed over its par face

value on July 22 at 100.4 and was

bid at 100.58 on August 1. The

US dollar loan was at 99.92 on

July 31 from 98.31 on July 22,

ACCORDINGûTOû,0#ûDATA

4HEûLARGEûSIZEûOFû2ElNITIVSû

loan has made it a liquid

benchmark for the secondary

loan market, and its loss will be

felt as investors struggle to

redeploy capital quickly.

2ElNITIVSûBONDHOLDERSûAREû

much happier as they will be

paid call protection when the

bonds are repaid early. The

company’s unsecured bonds

made the biggest gains, with a

€365m 6.875% November 2026

note up 10 points since July 26’s

Source: Refinitiv open to 112.7 bid, according to

85

90

95

100

105

110

115

Jan Apr Jul

2019

Oct

2018

REFINITIV US$1.575bn 8.25% 2026s

DAILY BID PRICE