(Reuters) - A syndicated loan of more than $9 billion backing global brewer SABMiller’s $10 billion hostile bid for Australian brewer Fosters could be finalized this week, banking sources said on Wednesday.
SABMiller, which is arranging the loan itself, approached a wider group of banks last week to join its advisers JP Morgan, Royal Bank of Scotland and Morgan Stanley.
SABMiller declined to comment.
SABMiller’s loan is expected to find enough support from relationship banks with access to dollars or those willing and able to bear the increased cost of dollar funding on such a large loan.
But the U.S.-dollar denomination of the loan could be difficult for some of the company’s European relationship banks after extreme volatility last week.
Dollar funding costs for Eurozone banks have tripled in three weeks and are expected to rise further, which may exclude some banks, bankers said.
On Wednesday, one bank tapped the European Central Bank’s dollar facility for $500 million for the first time since February, showing continuing distress in the money markets.
SABMiller has not included a premium to cover the increased cost of dollar funds in the loan’s pricing, which bankers describe as aggressive.
“Dollar funding costs have spiked, banks’ stocks have traded off, but there’s no premium for the dollar financing,” a head of loan syndicate said.
SABMiller launched its hostile bid for Fosters on Wednesday after earlier attempts to engage the Foster’s board failed. The offer values Australia’s largest brewer at A$9.5 billion ($10 billion), less any dividend paid by Foster’s.
The offer will be funded through existing resources and new debt committed by a number of financial institutions, SABMiller said.
SABMiller is rated BBB+ by Standard & Poor’s, Baa1 by Moody’s and BBB+ by Fitch.
($1 = 0.953 Australian Dollars)
Reporting by Alasdair Reilly; Editing by Will Waterman