* Market can support $50 bln M&A financing for high-grades
* Financing available to support $10 bln-$15 bln LBO
* Middle East unrest, European sovereign health a concern
* Consolidation seen vertical, not diversifying (Adds Weiss comments)
By Soyoung Kim and Nadia Damouni
NEW ORLEANS, March 31 (Reuters) - The financing market has capacity to support a lending facility of up to $50 billion for high investment-grade corporate buyers, potentially leading to more transformational takeovers this year, a top Lazard investment banker said on Thursday.
This year will see a higher number of large deals thanks to unprecedented cash levels and cheap financing, although concerns remain about unrest in the Middle East, inflation in commodity prices and European sovereign health, said Antonio Weiss, Lazard Ltd’s (LAZ.N) global head of investment banking.
In the world’s largest deal announced so far this year, JPMorgan Chase & Co (JPM.N) has agreed to provide a $20 billion bridge loan to AT&T (T.N) to help finance its proposed $39 billion acquisition of T-Mobile USA from Deutsche Telekom AG (DTEGn.DE).
Speaking at the Tulane corporate law conference in New Orleans, Weiss said that a multi-bank lending syndicate of up to $50 billion is systemically possible for high-grade strategic buyers.
U.S. companies, sitting on some $1.9 trillion of cash, are looking for transformational deals to reinforce their core businesses while refraining from transactions aimed at diversification, Weiss said.
As shareholders call for more streamlined operations, several diversified conglomerates such as ITT Corp (ITT.N) and Fortune Brands FO.N have also moved in recent months to separate different businesses using a tax-free spinoff.
Weiss said that spinoffs allow companies to “put in place appropriate corporate structures for each business” and open the door for transactions involving individual units, bolstering what is already expected to be a comeback in dealmaking.
“Some will stay independant, some will make acquisitions, while others will merge. I think we will also continue to see demergers,” he told Reuters on the sidelines of the conference.
Financing is also available for private equity buyers to support a leveraged buyout deal of $10 billion to $15 billion in size, Weiss said.
Private equity deal sizes have been increasing since the credit crisis cut off access to cheap debt, but deal size has returned to typically the $3 billion to $5 billion range - far lower than the double digit billion figures hit in 2006 and 2007. (Reporting by Soyoung Kim and Nadia Damouni, editing by Dave Zimmerman)