LONDON British cigarette maker Imperial Tobacco IMT.L is set to launch loans totaling $13.1 billion to back its acquisition of selected brands and assets from Reynolds American Inc (RAI.N), the lead banks said in a statement on Friday.
The deal is the second-biggest acquisition loan of the year in Europe, the Middle East and Africa, after a $14.2 billion loan for Bayer BAyGn.DE, which financed its acquisition of US-based Merck's (MRK.N) consumer care business, according to Thomson Reuters LPC data.
It is also the biggest loan of the year so far for a UK company, the data shows.
The jumbo financing will cover the $7.1 billion acquisition and refinance Imperial’s existing core bank borrowings, which provide working capital and funds for general corporate purposes.
Imperial agreed to acquire a portfolio of U.S. cigarette brands, Winston, Maverick, Kool, Salem and U.S. and international e-cigarette brand blu from Reynolds on Tuesday after Reynolds announced its merger with Lorrilard.
Imperial will also take over Lorrilard's national sales force, offices and production facilities.
The financing has been underwritten equally by bookrunners and mandated lead arrangers BNP Paribas Fortis, Royal Bank of Scotland and Banco Santander.
Royal Bank of Scotland is also facility agent on the transaction.
The acquisition financing includes a $4.1 billion term loan with a one-year maturity and a one-year extension option; a $1.5 billion, three-year term loan and a $1.5 billion, five-year term loan.
The refinancing and working capital facilities include a 1 billion euro ($1.35 billion) revolving credit facility with a maturity of 18 months and three six-month extension options and a 2.835 billion euro, five-year revolving credit with two one-year extension options.
A 500 million pounds ($854.55 million) five-year revolving credit with two one-year extension options is also included.
BBB/Baa3 rated Imperial expects to maintain an investment grade credit rating on its debt after the acquisition.
The company may refinance all or some of the loans before the acquisition closes, which is expected in six to nine months.
Imperial has suspended a share buy-back program of 500 million pounds a year to speed its debt repayment.
Imperial's core bank facility was a 2.458 billion pounds -equivalent revolving credit that was due to mature in December 2015. The financing was originally arranged in December 2010 via bookrunners Barclays and Royal Bank of Scotland.
That deal comprised a $632 million facility, a 600 million facility and a 1.785 billion euro facility, all of which paid margins of 100 basis points (bps) over Libor/Euribor.
The new loan has allowed Imperial to reduce its overall funding cost as the refinancing element was agreed at lower pricing to the existing facilities, Imperial said on Tuesday.
($1 = 0.7394 Euros)
($1 = 0.5851 British Pounds)
(Editing by Tessa Walsh)