Stretching possibilities
In a remarkably busy year for US leveraged loans, medical equipment maker Medline’s US$7.27bn term loan B stands out due to its size and significance. Not only is the facility the largest Single B rated loan ever syndicated, but it also backed the biggest leveraged buyout since the 2008 financial crisis.
LBO activity and related financing resumed in 2021 after a muted 2020 ravaged by the Covid-19 pandemic, which left private equity funds sitting on top of a record level of dry powder and loan investors hungry for paper.
That meant there was significant excitement when Medline announced its buyout on June 5 by PE sponsors Blackstone, The Carlyle Group and Hellman & Friedman, and when JP Morgan and Goldman Sachs brought the US$7.8bn of bridge loans to market in August to back the deal, investors snapped up the paper.
“As far as the bridge syndication went, we were at book subscription. Usually, a third or half gets sold as some firms don’t have a pocket for it. To have over US$7bn of subscription is huge when we were expecting only US$2bn,” said Jonathan Kaufman, global head of debt capital markets at Blackstone.
By the time the US$7.27bn term loan B hit the market in September, it had amassed 27 arranging banks – one of the largest bank groups seen on a leveraged loan to date.
To hit all pockets of demand, the debt financing included a US$500m-equivalent euro term loan B, US$4.5bn of senior secured notes and US$2.5bn of senior unsecured notes. Bank of America led the loan portion, while JP Morgan and Goldman led the secured and unsecured bonds.
With such strong demand for the debt, the leads were able to tweak the deal structure during marketing by reducing the unsecured notes by US$1.5bn from their initial size in favour of upsizing the cheaper secured bond and loan.
“We had US$35bn of gross demand for Refinitiv, and we had US$50bn of orders for Medline. That shows the growth of the market in terms of response and demand over the last three years,” said Kaufman.
Information provider Refinitiv, which owns IFR, was carved out of Thomson Reuters in 2018, when the media giant sold a majority stake in its business to Blackstone. Backing the transaction, which was one of the largest leveraged buyouts in years, was a US$12.825bn bond and loan financing.
“This informs our thinking of ‘the art of the possible’ – if there were a US$20bn or US$25bn financing, it could be possible, but you would need everyone in the market to participate,” Kaufman said.
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