| LONDON, June 20
LONDON, June 20 Banks have changed the terms on
a 7.6 billion euro ($10.36 billion) equivalent merger and
refinancing loan for Dutch coffee and tea company DE Master
Blenders' after investors protested about delayed fee
payments, bankers said on Thursday.
Investors were unhappy that fee payments were conditional on
the completion of the merger between DE Master Blenders' and the
coffee business of Mondelez International.
Mondelez and Master Blenders announced in May that they
would combine their coffee businesses into a new company called
Jacobs Douwe Egberts (JDE), based in the Netherlands.
Arranging banks Bank of America Merrill Lynch, JP Morgan and
Morgan Stanley have adjusted the deal to guarantee the fee
The deal includes a 2.9 billion euro term loan A and a 500
million euro revolving credit, which both pay 300 basis points
(bps) and a 4.2 billion euro-equivalent dual-currency term loan
B, which pays 325bps with a 75bps floor.
Investors were worried about not earning any fees for a year
until the merger was completed and the fact that existing fund
investors were not able to roll into the new deal.
The key changes are to a 'ticking fee' which compensates
investors until the merger completes and the date that the deal
Some investors felt committing to the deal on the original
terms left them exposed for too long without receiving cash.
The term loan B, which was originally not due to fund until
the acquisition completed in 2015, will now fund and be put into
an escrow account after 90 days.
The ticking fee will now be paid quarterly, instead of
accruing for a year. It will pay 50 percent of the margin
between 61 and 90 days, the full margin from 91-330 days, and
the full margin plus a Libor/Euribor floor (which guarantees a
minimum return for investors), after 330 days.
"The funds were being asked to buy something that does not
fund for a year, which isn't good for equity distributions for
the first year of a CLO," a banking source said.
The original issue discount on the term loan B is guided at
98.5 to 99.
Other terms remain the same which will disappoint some
investors. The term loan A, which is sold to bank investors and
will fund in the next couple of weeks, refinances a 3.3 billion
euro leveraged loan which backed Joh A Benckiser's 7.5 billion
euro acquisition of Master Blenders in 2013.
Existing fund investors in the 3.3 billion euro leveraged
loan are not being allowed to roll into the new term loan B,
which funds the merger, and they will be repaid.
Some CLO funds that were in the existing loan have passed
their reinvestment periods and are therefore unable to reinvest
the repayment into the new deal.
"For CLOs past the reinvestment period, the loan is getting
repaid which means managers lose assets under management, fees
and equity investors lose yield," the banking source said.
Some funds wanted to be allowed to join the term loan A and
roll into the deal but were not allowed to do so by the
"Banks find it far easier to sit on an unfunded commitment
than a fund. It is perplexing they have chosen to do it this way
round, especially as the company needs to tap a lot of
liquidity" a second banking source said.
As part of the merger, Mondelez will receive around $5
billion in cash, as well as a 49 percent equity stake in JDE.
($1 = 0.7336 Euros)
(Editing by Tessa Walsh)