Nasdaq Inc. has locked in debt financing for its acquisition of financial-software maker Adenza, proving that banks are still willing to lend to certain companies.
(Bloomberg) — Nasdaq Inc. has locked in debt financing for its acquisition of financial-software maker Adenza, proving that banks are still willing to lend to certain companies.
The stock exchange operator has secured an up to $5.7 billion bridge loan, according to a filing, to help fund the cash portion of its $10.5 billion purchase of Adenza from private equity firm Thoma Bravo. The deal would be the largest blue-chip loan for a merger and acquisition in the US this year, Bloomberg-compiled data shows, outstripping CVS Health Corp.’s loan for the acquisition of Oak Street Health Inc.
It’s the latest sign that banks are still willing to lend to select companies for M&A transactions, even as the volume of investment-grade loans supporting such deals has shrunk about 40% year-over-year, according to data compiled by Bloomberg. Much of the supply comprises term loans, often seen as less expensive and more flexible for companies than bridge loans.
Bridge loans are typically later replaced with permanent financing in the bond market that is sold to institutional investors. New York-based Nasdaq is planning to raise $5.9 billion in bonds by the time the merger closes, which it expects to be within six to nine months, according to a release.
There’s “limited risk that they won’t be able to term it out as they get closer to closing,” said Bloomberg Intelligence credit strategist Noel Hebert. “If you were talking a high-yield company or some LBO, etc., that would be a bit of a different animal.”
A representative for Nasdaq declined to comment.
Investors have been eager to snap up bonds related to M&A this year. In May, health-care giant CVS built a $37 billion order book when it funded its loan, while Pfizer Inc.’s $31 billion deal for its purchase of Seagen Inc. saw orders peak at around $85 billion and marked the fourth-largest US bond sale ever.
“Absent some material change, it’s not a deal that should challenge funding markets,” Hebert said, referring to Nasdaq’s latest transaction. “There is time to piece the deal out and be opportunistic about funding costs.”
Goldman Sachs Group Inc. and JPMorgan Chase & Co. are providing the bridge financing for Nasdaq, both acting as commitment parties.
S&P Global Ratings downgraded the company to BBB from BBB+ after the acquisition announcement. The bond grader cited the $5.9 billion debt raise, which it says “will weaken the company’s financial risk profile.”
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