2020-04-04 IFR Magazine

International Financing Review April 4 2020 85

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Mixed fortunes for M&A loans

„ US T-Mobile’s Sprint merger set to go ahead as Xerox pulls plug on HP chase

Mobile phone operator T-MOBILE asked banks

last week to fund US$23bn in loans to complete

the acquisition of peer Sprint Corp, while XEROX

decided to call off its long-running bid to take over

HP, thus a US$24bn bank financing will fall away.

The macroeconomic and market turmoil

caused by the coronavirus pandemic caused

Xerox to abandon the HP pursuit.

Xerox had secured US$24bn in financing

to back its hostile takeover of HP in January.

Citigroup, Mizuho and Bank of America were

the three original lenders. MUFG, PNC, Credit

Agricole and SunTrust joined the banking group

in March.

The commitment letter for the financing

agreed to provide a US$19.5bn senior unsecured

364-day capital markets bridge facility and a

US$4.5bn senior unsecured 60-day cashflow

bridge.

Xerox first offered to buy HP in November.

For T-Mobile, 16 banks will provide a US$19bn

364-day bridge loan and a US$4bn seven-year

term loan. The bridge loan is expected to be

refinanced by investment-grade bonds in the

near term.

On March 19, T-Mobile said the company

had been in communication with all 16 banks

and had not received notification that any

of the banks were unprepared to fund their

commitments to support the closing of the

merger.

Barclays, Credit Suisse, Deutsche Bank,

Goldman Sachs, Morgan Stanley and Royal Bank

of Canada previously committed US$38bn in

financing for the merger.

The initial bank group then expanded to 16

lenders, with BNP Paribas, Commerzbank, Credit

Agricole, TD Securities, Wells Fargo, Santander, SG

Americas, SunTrust, Natwest and US Bank joining

the deal.

The committed financing comprised a

US$11bn credit facility (made up of a US$4bn

five-year revolver and a US$7bn seven-year term

loan), a US$19bn 364-day senior secured bridge

facility, and a US$8bn senior unsecured bridge

facility.

T-Mobile is rated below investment grade, but

the debt is being treated as an investment-grade

transaction.

“This will evolve over time, but in the near

term, they will look to take out the 364-day

bridge loan with investment-grade bonds over

the next six to nine months,” one banker said.

The US$4bn five-year revolver pays 125bp over

Libor and the US$7bn seven-year term loan pays

175bp over Libor. Margins are subject to 25bp

step-downs based on the first-lien secured net

leverage ratio.

The US$19bn 364-day loan pays 125bp over

Libor, increasing by 25bp every three months

after an initial three-month period.

The US$8bn senior unsecured loan to a high-

yield bond comprises a US$4bn eight-year loan

that pays 350bp over Libor and a US$4bn 10-

year loan paying 375bp over Libor.

Daniela Guzman, Michelle Sierra

9 IFR Loans 2327 p 75 - XX.indd 85 03 / 04 / 2020 19 : 26 : 36