InBev launches $45 billion loan: sources

LONDON (Reuters) - Belgian brewer InBev INTB.BR has launched a $45 billion syndicated loan backing its proposed buyout of U.S. rival Anheuser-Busch Cos Inc (BUD.N), banking sources said on Friday, as the companies draw closer together.

InBev quashed queries over its financing by launching the loan, the second-largest European loan of the year after BHP Billiton's $55 billion deal, as it began negotiations with Anheuser-Busch on a friendly merger, a source told Reuters.

"We are not calling the bid hostile, it is unsolicited. There has been talk of a friendly deal which is what our M&A guys were expecting," a senior banker close to the deal said.

InBev is asking its relationship banks for large commitments of $1.75 billion each, in return for high pricing and fees and a rapid refinancing strategy, all of which have been designed to counter tough and illiquid loan market conditions.

"The company and its arranging banks have tried to eliminate all market risk," the senior banker said.

Around 20 senior lenders, in addition to the ten arranging banks, have been offered a generous initial interest margin of around 175 basis points (bps) over LIBOR stepping down over time to around 100 bps, sources said.

The pricing is among the highest seen on an investment-grade acquisition loan, and InBev is also offering high fees of 100 bps, several banking sources said.

"This is a must-do deal -- dealflow is limited and banks have budgets to make. This is as good a proposition as we've seen in investment-grade land," a banker close to the deal said.

InBev plans to cut the size of the loan by $19 billion or around 42 percent within a year which will nearly halve the large $1.75 billion commitments and allow the banks to reuse the capital, a banker close to the deal said.

Of the $45 billion loan, $7 billion is a one-year bridge loan to be repaid by asset disposals and $12 billion is a one-year bridge loan to be repaid by capital markets issues, the source said.

The remaining $26 billion will consist of a $13 billion three-year loan and a $13 billion five-year loan.

Pricing of the loan is tied to a ratings grid based on InBev's rating. InBev is currently unrated, but expects to attract an investment-grade rating, which is attractive to lenders as it improves capital markets access.

InBev is currently viewed as a BBB credit by banks working on the deal which could fall to BBB- post-acquisition, bankers said.

SIZE REMAINS CHALLENGING

The sheer size of the loan remains a potential stumbling block for banks in an illiquid loan market and the large $1.75 billion commitments remain challenging for cash-strapped lenders, as this year's large loans have already shown.

Pernod Ricard's (PERP.PA) 11.5 billion euro loan backing its acquisition of Sweden's Vin & Sprit was reduced from 12 billion euros and pricing and fees were flexed higher in mid-May.

Pernod's loan still closed around 700 million euros short, leaving some of its arranging banks overexposed and traded down in the secondary market, bringing losses for those seeking to sell and release capital.

InBev's emphasis on shorter one and three-year tenors, tied with generous pricing and fees, a rapid refinancing strategy and an investment-grade rating have been designed to eliminate all possible concerns about the size of the commitments.

"There have been lessons learned this year on jumbo loans," a banker said.

The ten arranging banks estimate that there are around 20-25 banks capable of making the large $1.75 billion commitments required, excluding around four banks currently conflicted by their close relationships with target Anheuser-Busch.

The arranging banks -- Bank of Tokyo-Mitsubishi UFJ, Barclays Capital, BNP Paribas, Deutsche Bank, Fortis, ING, JP Morgan, Mizuho, Royal Bank of Scotland and Santander -- are aiming to wrap up the syndication quickly to distribute the paper to minimize market risk in a volatile market environment.

The leads are looking to close this phase of senior syndication by the end of the month, and the loan will be launched to a further general syndication when the M&A process is complete.

(Additional reporting by Alasdair Reilly and Zaida Espana; Editing by David Holmes/Rory Channing)