| LONDON, June 30
LONDON, June 30 DE Master Blenders
has increased the bank portion of a 7.6 billion euro-equivalent
($10.4 billion) loan being used to refinance debt and help fund
a merger of its coffee business with that of Mondelez,
banking sources said on Monday.
The final terms of the loan emerged on Monday, and show the
Dutch tea and coffee company has moved to tap cheaper financing,
the sources said.
The bank portion has been increased by 1 billion euros at
the expense of the institutional fund piece, which will pay
higher interest after pushback from institutional investors
demanding better compensation, the sources added.
Master Blenders was not immediately available to comment.
Mondelez and Master Blenders announced in May that they
would combine their coffee businesses into a new company called
Jacobs Douwe Egberts (JDE). The deal, aimed at taking on market
leader Nestle, will marry Mondelez's grocery coffee
brands such as Carte Noire and Gevalia with Master Blenders'
L'OR, Pilao and Senseo brands.
As part of the deal, Mondelez will receive around $5 billion
in cash, as well as a 49 percent equity stake in JDE.
A five-year pro-rata bank portion of Master Blenders' loan
now includes a 3.9 billion euro term loan A, which was initially
launched at 2.9 billion euros, and a 500 million euro revolving
credit facility. Both pay 300 basis points (bps) in interest.
The extra 1 billion euros will be in the form of a delayed
draw term loan and will pay a commitment fee of 35 percent of
the margin up to 180 days, 70 percent of the margin from 180-360
days and the full margin after 360 days, the sources said.
The pro-rata piece, which is heavily oversubscribed and
refinances a 3.3 billion euro leveraged loan that backed Joh A
Benckiser's (JAB) 7.5 billion euro acquisition of Master
Blenders in 2013, was increased as it is cheaper than the fund
The borrower is also partial to bank funding, preferring to
leverage on established relationships and transparency of who
holds the debt, the sources said.
A 4.2 billion euro-equivalent dual-currency term loan B
(TLB), from institutional investors, has been reduced by 1
billion euros and now includes a 2.4 billion euro tranche and an
800 million euro, dollar-denominated tranche. The TLB was
originally launched with a 3 billion euro tranche and a 1.2
billion euro, dollar denominated tranche, the sources said.
Pricing on the TLB increased to 350bp with a 98 original
issue discount (OID) and a 75bp Euribor/Libor floor, which
guarantees minimum returns for investors. Pricing was initially
guided at 325bp with 98.5-99 OID and 75bp floor. Although
European investors agreed to the deal at 325bp, U.S. investors
wanted higher pricing, the sources said.
"The pro-rata portion was increased because it is cheaper
for the borrower in terms of margin and the commitment fee is
cheaper as well," one of the sources said.
This is the second time the deal has been adjusted since
launch after investors protested about delayed fee payments,
prompting changes to the ticking fee offered on the TLB.
Bank of America Merrill Lynch, JP Morgan and Morgan Stanley
have arranged the deal and institutional lenders have until July
1 to recommit to the TLB, with allocations due on July 2. Banks
have until the end of the week to recommit to the pro-rata
portion, which is due to allocate next week.
($1 = 0.7331 Euros)
(Editing by Pravin Char)