UPDATE 1-Sanofi pays low rate for $15 bln Genzyme loans

Mon Oct 4, 2010 8:20am EDT

* Initial interest costs about 93 bps, calculations show

* Sanofi says enjoying cheap debt

* Premiums thinner than BHP's $45 billion of Potash loans

(Adds detail, background on LIBOR, all-in costs)

By Quentin Webb and Alasdair Reilly

LONDON, Oct 4 (Reuters) - Sanofi-Aventis SA (SASY.PA) will pay initial interest rates of less than 1 percent on the $15 billion of loans backing its hostile bid for U.S. rare-disease specialist Genzyme Corp GENZ.O, a regulatory filing showed.

On Monday the French drugmaker went hostile with its $18.5 billion bid for Genzyme, taking the offer directly to shareholders after being rebuffed by Genzyme management. [ID:nLDE69302S]

Sanofi Chief Executive Chris Viehbacher is benefiting from what he terms "cheap debt", fuelled by ultra-low benchmark rates and a revival in the market for acquisition finance. [ID:nN23169075]

Sanofi has arranged $10 billion of 18-month loans, extendable for another six months, and $5 billion of 3-1/2 year loans with BNP Paribas, JPMorgan and Societe Generale.

It is paying an initial average of just 93.2 basis points, according to Reuters calculations.

The shorter loans pay a margin of just 55 basis points, or 0.55 percentage points, over inter-bank rates for the first three months, a Securities and Exchange Commission (SEC) filing showed.

With 3-month dollar LIBOR USD3MFSR=, over which such loans are typically priced, standing at 0.29063 percent, that implies an all-in borrowing cost of about 84 basis points.

The longer-term loan depends on Sanofi's credit ratings -- currently AA- from Standard & Poor's and A1, or the equivalent of one notch lower, from Moody's Investors Service. That gives a blended margin of 82.5 basis points.

The premiums are thinner than those on the $45 billion of loans backing BHP Billiton's pursuit of Potash Corporation of Saskatchewan Inc (POT.TO).

The miner, whose S&P rating is one notch lower, has agreed a loan package including $25 billion of 1-year loans at 70 basis points. Margins on Sanofi's $10 billion loan rise 20 bps every three months for the first year, and 30 bps for the following two quarters, so that after 15 months they are paying 1.75 percent. The $5 billion loan pays more if Sanofi's credit standing weakens. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For deal calculator on Genzyme offer, click on: here For a Breakingviews take on the bid: [ID:nLDE6930I5] For other Reuters stories on the bid battle: [ID:nLDE68S1PP] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Editing by Mike Nesbit)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.