Rocket speed
Aerospace and defence group RTX drew on the support of its relationship banks to put together a financing package at a speed associated with its aircraft.
Administrative agent Citigroup led a US$10bn 364-day bridge loan, which was structured and funded within about 15 days to enable RTX to capitalise on compelling equity conditions which encouraged it to bring its planned share repurchase programme forward and repurchase 10% of its outstanding shares in a single day.
While accelerated share repurchase programmes are commonplace, typically they are executed over time, and the funding is provided as those shares are repurchased.
Without enough cash to execute the entire purchase upfront, the company funded the purchase through the bridge loan, which it refinanced three months later.
A defect within an engine manufactured by subsidiary Pratt & Whitney impacted RTX’s stock price, providing a buying opportunity for the company, which announced a US$10bn accelerated share repurchase programme when reporting its third-quarter results for 2023.
RTX wanted to announce its ASR in connection with its October 24 quarterly earnings report, allowing only a short lead time for banks to structure the financing.
“They had US$5bn in cash on their balance sheet and wanted a US$10bn ASR, which required them to have the funds. We got creative in structuring a bridge that would be funded to facilitate the ASR execution, which settled two days after their earnings announcement,” said Susan Olsen, head of North America investment-grade loans at Citigroup.
During a year in which appetite for funded loans among investment-grade loan bankers was weakened due to rising funding costs, volatility in the banking industry and a significant focus on profitability, the bridge loan was underwritten and funded by five institutions before being syndicated.
“We would have been happy to do 100% of it,” said Olsen, “[But bringing more banks into the bridge loan] was an opportunity for [RTX] to give their banks a little more business strategically, in addition to getting competing bids on the ASR to get the best execution.”
Citigroup, Goldman Sachs, Bank of America, JP Morgan and Morgan Stanley led the bridge financing.
In a rapid turnaround, the bridge loan was taken out by a US$4bn term loan signed on November 7 which is split equally between an 18-month and three-year tranche, as well as US$6bn of unsecured notes.
The take-out term loan attracted 12 additional lenders, further testament to the relationship strength of RTX at a time when new money term loans were a relatively limited occurrence.
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