LONDON (Reuters) - Loan financing for InBev’s potential takeover of Anheuser-Busch Cos Inc looks uncertain as a tight loan market may not bear such huge acquisition funding, bankers told Reuters Loan Pricing Corp.
The Sunday Telegraph reported InBev was close to securing a $50 billion financing package to enable it to launch a bid for Anheuser-Busch, the U.S. maker of Budweiser beer.
“If it’s that size, it’s a big ask of the market, with huge risk in selling down,” one senior banker said on Monday.
The paper said that the company had held talks with JP Morgan, Santander, BNP Paribas and Merrill Lynch. None of the four banks was immediately available to comment.
Others are more skeptical about how far discussions have gone. “This is pure kite flying in my opinion,” said a second banker. “The banks involved would have to guarantee the debt for the bid to proceed and I don’t see that happening in this market.”
Banks are battling sky-rocketing funding costs, and the InBev deal will be expensive, bankers said. Estimates of margins vary widely from 250 basis points to 400 bps over LIBOR.
“I can’t see how anything like this could get done without an enormous fee being paid,” a third banker added.
If the acquisition goes through, bankers said a rapid repayment of debt would need to follow and that the group’s options are limited.
“There must be a break-up of the company, disposals would have to happen. Access to capital markets would be an option, but nothing of that size can be done yet,” a fourth banker said.
Any acquisition and subsequent disposal operation would take time bankers said, and underwriting banks might not be willing to sit on such a vast amount of debt for that long a time.
The main sticking point may well be banks’ willingness to commit to non-relationship deals on big tickets, where the incentive of ancillary business is either non-existent or, once diluted among participating banks, paltry at best. One banker said the deal would require around 20 underwriters and that not much ancillary business would come on the back of such a deal.
InBev -- the world’s No.2 brewer, created when Interbrew bought Brazil’s AmBev in 2004 -- is currently unrated, while Anheuser-Busch is rated A by S&P and Fitch.
InBev declined to comment.
Editing by Louise Ireland