SABMiller's Fosters bid loan totals $12.5 billion
LONDON (Reuters) - Global brewer SABMiller (SAB.L) is raising a $12.5 billion syndicated loan to back its hostile bid for Fosters FGL.AX, banking sources said on Thursday.
The dollar-denominated loan is priced at around 90 basis points (bps) over LIBOR, the sources said, well under European banks' dollar funding rates which spiked this week.
The loan includes an 18-month bridge loan to bond issues of around $8.5 billion and also includes three and five-year term and revolving facilities, one of the bankers said.
SABMiller is arranging the loan itself and has asked banks to commit $1.6 billion each.
SABMiller is pushing to close its jumbo loan as Europe's dollar funding crisis deepens.
SABMiller is expected to raise the full amount of the loan from banks with easy access to dollar funding -- either U.S. banks with dollar retail deposits or Japanese banks with lower funding costs.
The decision to join the loan is a painful one for many of Europe's top arranging banks, which are paying nearly twice as much for dollars as the loan's interest margin.
The marginal cost of dollar funding is more than 200 bps, using Credit Default Swaps as a proxy, a senior loan banker said.
"Dollar funding costs are worse now than when this loan was discussed. In the last 10 days, everyone has seen the cost of funding dollars on a marginal basis ramp up," he added.
While banks will net significant ancillary business from the company's planned bond issues, European banks will lose money on the loan component.
"Banks will have to swallow the implied cost of funds to get the ancillary business," the senior loan banker said.
The loan may be syndicated further at a later stage to reduce banks' exposure and risk.
The loan's pricing varies across the different maturities of the tranches. Pricing on the bridge loan steps up over time to encourage an early refinancing in the bond market.
The $12.5 billion loan is expected to be signed on Friday, the sources said.
(Reporting by Tessa Walsh and Alasdair Reilly; Editing by Hans-Juergen Peters)
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