Chinese banks are among a handful of lenders finalizing a deal to buy around €600 million ($631 million) of the debt backing the merger of Orange SA and Masmovil Ibercom SA’s Spanish divisions, one of Europe’s largest leveraged finance deals.
(Bloomberg) — Chinese banks are among a handful of lenders finalizing a deal to buy around €600 million ($631 million) of the debt backing the merger of Orange SA and Masmovil Ibercom SA’s Spanish divisions, one of Europe’s largest leveraged finance deals.
Bank of China Ltd. and Industrial & Commercial Bank of China Ltd. are in the group purchasing part of the €6.6 billion package, according to people with knowledge of the matter who asked not to be identified because the talks are private.
The joint venture is the latest European leveraged finance deal to attract Asian lenders. Previous targets include Unilever’s tea business Ekaterra and Wm Morrison Supermarkets Plc. With investors in Europe and the US increasingly risk averse amid recession fears, lenders are open to interest from international banks as they seek to offload some of the debt on their balance sheets.
Masmovil Orange is particularly attractive as it is expected to get a BB rating, which is higher than the typical single-B leveraged debt issuer, the people said.
Bank of China, ICBC and Masmovil didn’t immediately reply to emails seeking comment. A spokesperson for Orange declined to comment.
Talks with the additional lenders started in September and were being finalized in the last days of 2022, the people said.
For the arranging banks on the deal, including Bank of America Corp, BNP Paribas SA and Banco Santander SA, the reduction in their exposure is a welcome development, they added.
The new group of lenders are buying a chunk of the €4 billion term loan A, the people said, a loan which is typically held by the arrangers rather than sold on.
Spokespeople for Bank of America and BNP Paribas, Santander declined to comment.
Lenders found themselves stuck holding much more junk debt than usual in 2022. Even on debt packages they managed to sell, they took huge losses, as the funding market grappled with the impact of an energy crisis, soaring inflation and the risk of recession.
While the purchase benefits the arrangers, the borrowers also stand to gain from the deal, the people said, as the new lenders’ participation will result in a more diverse lender base.
Original Debt
A large group of banks provided the original debt package back in July. That consisted of the term loan A; a €2 billion term loan B, a loan typically sold down to institutional investors via syndication; and a €600 million unfunded capital expenditure facility.
The financing is also expected to include some junior holdco debt too, the people said.
There’s a chance that another bank will come into the TLA, increasing its size, the people added, which would reduce the more expensive TLB by the same amount.
Syndication of the €2 billion TLB, likely to be denominated in dollars, isn’t expected until Q2, closer to when the deal is likely to close, the people said.
–With assistance from Irene García Pérez, Evelyn Yu, Benoit Berthelot and Charles Penty.
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