Once in a lifetime
When rumours arose of a US$100bn–$130bn transaction backing Verizon Communications’ acquisition of the remaining 45% stake that it did not own in Verizon Wireless from the Vodafone Group, the market wondered if such a thing was possible. Then, on September 2 2013, the talk became a reality that the market will remember for years to come.
“It is really a once in a generation, a once in a lifetime deal,” said Anish Shah, global head of investment-grade loans at Morgan Stanley.
JP Morgan, Morgan Stanley, Bank of America Merrill Lynch and Barclays were joint lead arrangers and joint bookrunners on the record-breaking financing. The 364-day facility was underwritten equally among the four banks and included a US$12bn bridge to loans and a US$49bn bridge to bonds. JP Morgan and Morgan Stanley were global co-ordinators, while JP Morgan was the administrative agent.
The jumbo loan not only backed the largest acquisition ever, it is also the largest committed financing in history and constitutes the largest bridge loan of all time.
While putting together the financing, which was done on a certain funds basis, it was important to come up with an amount that would encompass not only what the company needed, but also what was available in the market.
“The importance in terms of the quantum of debt was really to strike the right balance between what the company wanted from a corporate finance perspective, but also, on the other hand, how much debt capacity there was,” said Claire O’Connor, Barclays’ head of loan capital markets Americas. “How much debt Verizon would be able to put on while retaining the ratings that they wanted, what we thought could be distributed in the bank market and what we thought the demand in the bond market was. If you put all those things into a blender, US$61bn is what came out.”
Given the US$15.25bn that each underwriter committed, a size that is significantly larger than most M&A deals, a quick takeout in the bond market was paramount.
“What we knew was that we were going to be asking a lot of banks for amounts that were well outside their comfort zones. These were commitment sizes that were probably larger than most deals,” said Peter Hall, global head of investment-grade loans at BofA Merrill.
Syndication of a US$12bn term loan was launched the same week and tapped into banks’ strong appetite for funded assets. The following week, Verizon replaced the bridge-to-bonds component with US$49bn in bonds.
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