Market risk speeds InBev's $45 billion loan launch

LONDON (Reuters) - Belgian brewer InBev NV's $45 billion loan backing its bid for Anheuser-Busch Cos Inc (BUD.N) is racing towards syndication as bankers nervously eye a welter of jumbo M&A loans yet to hit a strained market.

"The loan is likely to be syndicated very soon, as in days," a syndicate head at one of InBev's INTB.BR arranging banks told Reuters LPC, adding that no final decision had yet been taken on dates for the launch or the London bank meeting.

The rapid syndication of InBev's massive $45 billion loan shows the start of a second-half dash to grab banks' dwindling cash. InBev's loan is one of several huge M&A loans that are awaiting syndication and is first to market to beat the summer slowdown.

These include BHP Billiton Plc/Ltd's (BHP.AX) (BLT.L) $55 billion loan backing its bid for rival Rio Tinto Plc (RIO.L), an 11.5 billion pounds ($22.8 billion) loan for France's EDF (EDF.PA) backing its bid for British Energy Group Plc BGY.L and a loan backing BG Group Plc's (BG.L) $13.1 billion bid for Australia's Origin Energy Ltd (ORG.AX).

Bankers are crossing their fingers and hoping that nothing worse than the usual 50-50 probability of success will apply to the M&A bids. France Telecom's (FTE.PA) $20 billion loan backing its bid for TeliaSonera (TLSN.ST) disappeared when it withdrew its $40 billion offer on Monday.

The convergence of jumbo loans is still making bankers nervous as the loan market is potentially facing its biggest cash call at a time when it can least afford it. Bank liquidity is dropping and serious questions remain around loan market capacity.

"The loan market is under pressure. It's simple liquidity -- there isn't very much and its availability is shortening. There is less cash in the system than there has been for a long time and the market's facing loads of jumbo loans," a loan syndicate head said.

InBev has already bolstered its loan by adding a further two arranging banks to the lineup -- Bank of Tokyo Mitsubishi and Mizuho -- which join Banco Santander, Barclays Capital, BNP Paribas, Deutsche Bank, Fortis, ING, JP Morgan and Royal Bank of Scotland. It has already paid its arranging banks $50 million in commitment fees.

DISCOURAGING PRECEDENTS

The loan is expected to bypass the traditional sub-underwriting phase and launch directly to senior syndication next week before the summer recess, several sources have said.

Yet the precedents for syndicating jumbo loans are not encouraging, as French drinks group Pernod Ricard (PERP.PA) found when it attempted to syndicate a 12 billion euro ($19.1 billion) loan to finance its acquisition of Sweden's Vin & Sprit.

Pernod Ricard was forced to cut its loan to 11.5 billion euros and increase pricing by 30 basis points (bps) to 120-155 bps and increase fees by 20 bps. The loan still closed undersubscribed and some of Pernod's arranging banks were left holding a shortfall of around 700 million euros.

This brought losses for banks seeking to reduce their exposure in the secondary market to free up capital when the loan traded outside fees at around 96.5 percent of face value.

"I don't think any of these big deals have been a success and the lending environment is far worse than it was," a second loan syndicate head said.

"These deals require a huge amount of balance sheet and underwriting, but no-one can afford to lend money and (banks) are finding that very difficult to balance with relationship and being there for the client," he added.

The silver lining for lenders is that loan pricing is rising and there is money to be made from the acquisition financings which offer higher margins and fees. But banks face increased funding costs -- from 30-60 basis points for top banks to up to 200 bps for emerging markets banks -- that are eating into returns.

For many banks, the lure of higher margins and fees may be too much to pass up, particularly as income otherwise remains scarce, although lenders are expected to push for shorter tenors and rapid refinancings through bond issues or asset sales.

"Surprisingly, through greed people are seeing the opportunity to make large fees on these deals and there is still a market there," the second syndicate head added. "Greed is driving people because it's going to be a lean time in the second half".

(Editing by David Holmes)