* Loans: JP Morgan leads US$30.85bn bridge for Shireacquisition
By Wakako Sato and Alasdair Reilly
TOKYO, May 14 (TRLPC) - Takeda Pharmaceutical's£46bn (US$62bn) acquisition of London-listed rare-diseasespecialist Shire has prompted Japan’s top drugmaker toline up a US$30.85bn bridge loan, the largest raised in Asia todate.
The jumbo financing is expected to provide opportunities forasset-hungry lenders, both domestic and international, to lendto Takeda either through syndication of the bridge or arefinancing planned within a year.
JP Morgan is underwriting 50% of the financing, and MUFG andSumitomo Mitsui Banking Corp are committing equally to theremainder.
A bank meeting is scheduled to take place in Tokyo thisweek. Market participants expect the three banks to sell theloan down given the massive size and the timeline for the M&A.
“It is reasonable to think the bridge will be syndicatedgiven the size of the deal. It still would take time beforebeing refinanced,” one of the sources said.
The financing comprises a US$15.35bn 364-day tranche, aUS$4.5bn 364-day tranche, a US$7.5bn 364-day tranche, and aUS$3.5bn 90-day tranche.
The financing pays a margin and commitment fee based on aratings grid. For A1/A+ the margin is 75bp over Libor with a 7bpcommitment fee; for A2/A it is 87.5bp with an 8bp fee; for A3/A–it is 100bp with a 9bp fee; for Baa1/BBB+ it is 112.5bp with a10bp fee; for Baa2/BBB it is 125bp with a 12.5bp fee; and forlower ratings it is 150bp with a 17.5bp fee.
Margins increase by 25bp every three months after closing.
Duration fees start at 50bp 90 days after closing, rising to75bp 180 days after closing and to 100bp 270 days after closing.Duration fees apply to outstanding drawn and undrawncommitments.
The deal breathes new life into the moribund loan market inJapan, where transactions typically pay ultra-tight pricing anddomestic banks dominate.
It should also attract foreign lenders keen to get a pieceof a high-profile M&A loan. Takeda's acquisition of Shire, ifsuccessful, would be the largest overseas purchase by a Japanesecompany and also the biggest in the pharmaceutical sector since2000.
“The pricing on Takeda’s loan is in line with its bonds,which is not bad. I think the deal would generate enoughappetite from lenders,” said a senior banker at an internationalbank.REFINANCING OPTIONSTakeda said the bridge financing will be taken out through acombination of long-term debt, hybrid capital and available cashbefore the acquisition, which is expected to be completed in thefirst half of 2019.
Takeda also said following the acquisition Shire’ssubstantial cashflow will enable the enlarged group to pay downits borrowings quickly.
Bankers expect Takeda to tap a hybrid financing to replacethe bridge as it is committed to maintaining its investmentgrade rating with a target of achieving a net debt to Ebitdaratio of 2x or less in the medium term.
Last week Moody’s cut Takeda’s rating to A2 from A1 andplaced it under review for further downgrade. S&P placedTakeda’s A– rating on review for downgrade up to two notches,depending on the financing scheme.
Takeda's debt will likely increase six-fold to ¥6trn(US$54.7bn), including Shire’s existing debt of around ¥2trn,and if all of the ¥3trn cash offered to Shire's shareholders isfunded by debt, Moody’s said. Debt-to-Ebitda will almost doubleto about 6x.SOFTBANK PRECEDENTTakeda’s bridge will be the largest loan from Asia, easilytrumping a ¥2.65trn (then US$23bn) jumbo refinancing in Novemberfor SoftBank Group Corp. Twenty-five banks, includingoriginal mandated lead arranger and bookrunner Mizuho Bank,participated in the multi-tranche borrowing, which refinanced a¥1trn acquisition financing from September 2016 that backedSoftBank’s £24.3bn purchase of UK chip designer ARM Holdings.
China National Chemical Corp (ChemChina) provides anotherexample of a jumbo acquisition that led to several financingopportunities through loans and bonds. In 2016, ChemChina raisedUS$32.9bn in recourse and non-recourse bridge loans from morethan 20 Chinese, European and Asian lenders for its SFr43bn(then US$43bn) acquisition of Swiss seeds and pesticides makerSyngenta.
The Chinese state-owned giant has since raised multiplefundraisings with the latest being a US$5.5bn in March thatattracted 39 lenders, including 15 mandated lead arrangers andbookrunners. In early April Syngenta mandated banks to arrange aseries of bond investor meetings about raising up to US$4.8bn ofbonds and possibly new bank loans.
(Reporting By Wakako Sato and Alasdair Reilly; Editing byPrakash Chakravarti and Steve Garton)