Expanding horizon
When BPEA EQT wrapped up US$1.88bn-equivalent of incremental credit facilities in July 2023 to finance the merger of Hong Kong-based business services companies Tricor and Vistra, it marked the culmination of a months-long process that kicked off in late 2022 amid an overhang of stuck deals in the Term loan B markets in the US and Europe.
The fact that the borrowing crossed the finish line comfortably despite that backdrop and deteriorating market conditions is impressive. In the process, the financing achieved some milestones, including becoming the first TLB to include a Hong Kong dollar-denominated tranche and the largest such multi-currency financing for an Asian credit.
Split into a US$1.66bn incremental covenant-lite TLB and a US$220m add-on revolving credit facility, the financing started taking shape after private equity giant Baring Private Equity Asia (now EQT Private Capital Asia) picked Goldman Sachs in September 2022 as lead adviser for the merger of Tricor and Vistra. BPEA had acquired the two companies in 2021 and 2015 respectively and had tapped US dollar and euro-denominated TLBs to fund the buyouts.
The US$1.88bn TLB and RCF was incremental to Tricor’s existing debt and refinanced Vistra’s borrowings. Comprising senior secured first-lien portions of US$600m, €816m and HK$1.36bn (US$173m), the introduction of the Hong Kong dollar tranche optimised the currency mix to match the sources of revenues and geographical presence of the underlying businesses, as well as the weighted average cost of debt.
By early March seven more banks were added to the arranger group comprising active bookrunners Goldman Sachs (lead-left), Barclays, Deutsche Bank and HSBC. But the crisis in US banking and Credit Suisse’s troubles led to heightened volatility and forced the leads to revise the terms.
Several changes to documentation were made, including altering the pari passu ratio debt incurrence test and the permitted debt ratio.
A three-stage syndication process helped attract investor interest and maximise liquidity across three different regions.
Asian investors, some of whom were new to the TLB structure, took over US$500m in the deal, representing the largest commitment from the region (excluding Australia) for a global TLB. Many existing lenders rolled over and increased their exposure, which helped the deal navigate the volatility.
The Hong Kong dollar piece priced at 400bp with a 97 OID, while the US dollar and euro tranches were tightened to 475bp over SOFR/Euribor with a 97.5 OID from 475bp with 96-97 OID at launch.
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