About 21 banks are expected to participate in backing the acquisition of the financial and risk division of Thomson Reuters by private equity giant Blackstone Group. The PE firm requires approximately $13.5 billion in bond and loan financing. Leading the effort are Citigroup, Bank of America and JPMorgan Chase.
Since the global financial crisis around a decade ago this is the largest buyout financing deal. The lead banks have sent an invitation to 23 other banks so that they can join and assist in underwriting 28% of the remaining deal and charge fees ranging between 3% to under 1%.
Blackstone Group is acquiring a stake of 55% in the F&R unit of Thomson Reuters and this includes IFR and LPC. After the lead banks the other financial institutions which are making the largest commitments are UBS, Goldman Sachs, Morgan Stanley and Wells Fargo. It is understood that the tiers of commitments could be up to seven.
Other financial institutions which are expected to be part of the deal include Intesa Sanpaolo, Jefferies, Credit Suisse, ING, HSBC, Barclays, Deutsche Bank, Royal Bank of Canada, MUFG, SMBC, Mizuho, Standard Chartered, Societe Generale, Natixis, Toronto Dominion, BMO, and Unicredit. The financing includes a loan of $8 billion part of which will be lent out in euros. There will also be secured bonds as well as unsecured bonds in both US dollars and euros.
The inclusion of more financial institutions in the bond and loan deal comes in the wake of disclosures that the founder of Blackstone, Steve Schwarzman, got approximately $800 million last year as compensation, an indication that the private equity space is in good health. Most of Schwarzman’s compensation emanated from dividends as he owns about 20% of the PE firm. Currently Blackstone has around $434 billion under management.
With loose monetary policies having been in place for close to a decade now, PE firms have greatly benefited from this environment as it has enabled them to pile high debt levels on their acquisitions since the cost of servicing debt is low. Additionally these PE firms which, besides Blackstone, include KKR, Carlyle and Apollo Global Management have also managed to get themselves listed on stock markets which have been trading at record highs.
The environment has also seen the sovereign wealth funds and pension funds turning to PE firms as they look for yield in a world of low interest rates. In 2017 shares of Blackstone rose by 27.3%.