Dollar delight
Merchant payments business Worldpay was able to secure attractive terms on a US$5.2bn first-lien term loan B, part of an US$8.65bn-equivalent financing across the loan and bond markets, amid a dearth of leveraged buyout and acquisition activity.
The loan, to back private equity firm GTCR’s acquisition of a majority stake in the Ba3/BB rated company, is among the largest LBO syndicated financings since the financial crisis and showcased investors’ strong appetite for US dollars in the leveraged market – particularly in the loan asset class.
GTCR agreed in July to acquire 55% of Worldpay from FIS in a transaction that valued the merchant payment business at US$18.5bn. In a more standard LBO, sponsors would own the entire acquisition target and leverage would be much higher, factors that add a lot more risk for debt investors.
The financing was a bright spot for the US leveraged buyout debt markets, which saw LBO loan volume drop more than 65% in 2023 from the prior year. Of the total financing a whopping US$7.375bn was raised in US dollars. Though the US market is typically deeper and more liquid than others, demand still exceeded what underwriters and the sponsor originally envisaged.
The final structure comprised a US$5.2bn first-lien term loan B, a €500m TLB, a US$2.175bn secured bond and a £600m secured bond, after the US dollar loan and the US dollar bond were increased from US$3.4bn and US$2bn, respectively. Concurrently, the euro TLB was cut from a US$1bn-equivalent target, while the sterling bond was downsized by £100m.
“[WorldPay was] a Double B in a really good market backdrop. It certainly ended up being a heck of a lot easier than everyone thought it was going to be when the deal signed up,” said Chris Bonner, head of leveraged finance capital markets at Goldman Sachs.
JP Morgan was lead-left on the US dollar bond and loan tranches and Goldman Sachs held the same role on the sterling bond and euro loan.
There was impressive execution and deep appetite for the US loan piece in particular. Pricing on the seven-year first-lien term loan was tightened to 300bp over SOFR with a 99.5 original issue discount, tightened from 350bp–375bp with a 99 OID at launch.
A large part of the appeal for investors was that this was not a typical leveraged buyout, even if – in a classic sponsor move – GTCR in the end decided to increase the overall debt portion of the financing from US$8.4bn and to lower its equity contribution.
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