London Stock Exchange sets sights on $10bn-plus bridge takeout

London Stock Exchange Group could turn to the bond market before April to take out large chunks of the bridge loan it used to buy data and analytics company Refinitiv, according to people familiar with the matter. The US$27bn acquisition was completed last week and LSEG can now weigh up refinancing options.

“The bridge has been out there for 16 to 17 months so it would make sense for it to be taken out in the bond market,” said a senior debt capital markets banker who is familiar with the matter.

LSEG, which after the takeover of Refinitiv owns IFR, agreed an underwritten bridge loan in August 2019 of around US$13.5bn to support the acquisition.

The takeout could be in excess of US$10bn divided between bonds and loans and split into different currencies. Those involved think it will be weighted to bonds over loans and to US dollars over other currencies, with the issuer working out with advisers the optimal time and currency mix.

“I think the preference is to do US dollars given the flavour of the business. While there could be a mixture of currencies, a large portion would probably get taken out in the dollar market – it’s the deepest market and you can get multiple tranches done, whereas in sterling you’re looking at £750m to £1bn,” said the banker.

The bridge loan refinanced the US$13.5bn of leveraged loans and bonds that backed the US$20bn purchase of a majority stake in Refinitiv from Thomson Reuters in October 2018 by a consortium led by US private equity firm Blackstone.

The intention when the LSEG-Refinitiv deal was announced was to take out the loans in the fourth quarter of 2020 or first quarter of 2021, depending on when the takeover was completed.

“If I was a betting man there’ll be nothing in February given closed periods,” the banker said, referring to the silent period immediately before companies announce results. “They’ll then need to update docs and depending on all that, you could look at execution before or after Easter.”

“They’ll need to sort out their pro forma [accounts],” another DCM banker said. “It’s a Class 1 acquisition so that will require more onerous disclosures [and] more work with auditors to get the numbers sorted.”

His advice is to strike while funding conditions are good. “The market is on fire. Rates have come down again. And it’s a very big deal – you would want to reduce that bridge. There’s no point sitting on it.”

He agreed that LSEG would weight the financing towards US dollars. “In acquisition finance, the dollar market is the most liquid market,” he said.

The US investment-grade bond market has made a strong start to the year with volumes of US$159.1bn as February 1, ahead of the US$140.3bn raised over the same period in 2020, IFR data show.

“Now that the acquisition is confirmed as closed, it is fortuitous timing because the corporate high-grade bond market could not be any stronger. Investors are crying out for yield and product, and anything that comes to market can expect a rapturous response,” said a head of loan syndications familiar with the deal.

The underwriters of the bridge loan – Barclays, Goldman Sachs and Morgan Stanley – are in pole position to snare the mandate to lead the takeout.

While the majority of the takeout will be through the bond market, the company could also raise a term loan and there have been discussions around doing this, a second loan syndicate head said.

“They have the ability to raise a term loan in this market,” he said. “As part of the syndication of the bridge loan way back when in 2019, pre-Covid, there was a discussion around it and what it would require but the market then closed. The market has now returned and it is most certainly possible for them to do it.”

A spokesperson for LSEG declined to comment.

Market minnow

Despite having a balance sheet of almost £50bn, LSEG is a bond market minnow with only £1.6bn-equivalent of paper outstanding, according to IFR data. The company has a £300m issue due to mature in November.

The issuer’s 1.75% €500m September 2029 bond was trading in the high 100s in April last year but was quoted at 72.5bp on Wednesday, according to Tradeweb. A €500m 1.75% December 2027 trade that was in the low 200s over mid-swaps in 2020 was quoted at 56.5bp at the same time.

A new bond sale should benefit from LSEG’s status as one of the biggest providers of financial market infrastructure with decent investment-grade ratings.

In the past week, Moody’s and S&P affirmed LSEG’s long-term ratings at A3/A. Moody’s changed its outlook to stable, having previously had the rating on review for downgrade, while S&P removed its CreditWatch Negative placement and now has a negative outlook.

The bridge loan to be taken out comprises US$9.325bn and €3.58bn tranches. Both mature up to 2.5 years after the loan was signed, and have six-month extension options.

Barclays, Goldman and Morgan Stanley were joined on the bridge by a bank group comprising Banca IMI, Banco Santander, Bank of America, Bank of China, BNP Paribas, China Construction Bank, Citigroup, HSBC, Lloyds, MUFG, NatWest, Royal Bank of Canada, SMBC, Toronto Dominion Bank and Wells Fargo.

Source: IFR