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By Claire Ruckin and Andrew Berlin
LONDON, Jan 30 (Reuters) - Banks are lining up a jumbo leveraged financing of around US$13bn to back US private equity firm Blackstone Group’s potential acquisition of a 55% stake in the Financial and Risk business of Thomson Reuters Corp , banking sources said.
Bank of America Merrill Lynch, Citigroup and JP Morgan are expected to lead the debt financing, if the deal goes ahead, with several other banks due to the large size of the underwriting, the banking sources told Loan Pricing Corp.
Thomson Reuters said in a statement late on Monday that "it is in advanced discussions with Blackstone regarding a potential partnership in its F&R business." The deal values the unit at about US$20bn, consisting of about US$7bn in equity and US$13bn in debt.
The financing is expected to be led from New York and comprise leveraged loans and high yield bonds, denominated mainly in dollars, sources said. It is also expected to include euro tranches, they added.
A US$13bn financing would give leverage of around 7.5 times, based on last 12 months Ebitda of approximately US$1.7bn for the F&R unit. Senior leverage of roughly 4.5-5.0 times could give a loan of US$8bn-$9bn, and junior debt of US$4bn-$5bn, sources said.
Another source familiar with the matter said that leverage was expected to be below 6.0 times.
Although the size of the financing is challenging, liquid banks and investors are eager to lend to new buyouts as the strong level of global demand continues to exceed supply.
“The market capacity for Europe is about €5bn between loans and bonds and in the US is US$10bn-$15bn, so if there is a big deal that pushes capacity and the business has revenue globally it would make sense to have euro and dollars in loans and bonds to create a competitive dynamic in order to get best execution,” a senior banker said.
It is the largest LBO loan financing since 2013 when ketchup maker HJ Heinz raised a US$14.1bn financing to back its buyout by Warren Buffett's Berkshire Hathaway and 3G Capital.
Thomson Reuters and Blackstone declined to comment.
Thomson Reuters' board is expected to meet on Tuesday to discuss Blackstone's offer for the F&R business, which supplies news, data and analytics to banks and investment houses around the world. The unit contributes more than half of Thomson Reuters' annual revenues.
Under the terms of the Blackstone offer, Thomson Reuters would retain a 45% stake in the F&R business in partnership with the US buyout firm.
Loan Pricing Corp is a unit of Thomson Reuters.
Additional reporting by Davide Scigliuzzo in New York; Editing by Christopher Mangham and Tessa Walsh