LONDON, Oct 2 (Reuters) - An 11 billion-pound ($19.46 billion) loan backing
French state-controlled utility EDF's acquisition of UK nuclear operator British
Energy is expected to launch to senior syndication later on Thursday, bankers
close to the deal said.
The addition of a new jumbo loan will further stretch the European
syndicated loan market. Liquidity has been hit hard by the global financial
crisis and the market is already struggling to digest up to $94.5 billion of
mergers and acquisitions (M&A) loans for companies such as InBev, Schaeffler and
Gas Natural.
Loan pricing is spiralling as banks try to attract scarce liquidity and pass
increased funding costs on to borrowers. Sterling is a relatively illiquid
lending currency, bankers said, with the cost of three-month interbank sterling
borrowing high at 6.2775 percent.
EDF is 84.8 percent state-owned and is rated AA- by Standard & Poor's and
Fitch and Aa1 by Moody's.
Despite this, the company is expected to pay a high initial margin of more
than 100 basis points over LIBOR due to the current market dislocation, two
bankers said.
The French utility paid an initial margin of 12.5 basis points over EURIBOR
when it tapped the syndicated loan market in 2005 for a 6 billion-euro ($8.37
billion) refinancing.
The current loan is being arranged by bookrunners and underwriters Bank of
Tokyo Mitsubishi, Barclays, BNP Paribas, Calyon, HSBC, Royal Bank of Scotland
and Societe Generale.
The arrangers will be targetting a range of senior banks to participate as
mandated lead arrangers, a banker said.
"EDF has a very attractive global footprint and there is a varied number of
banks we're going to go to. I'm sure if people want to step up for a big ticket
they will be welcome to do so," another banker said.
EDF agreed to pay 774 pence per British Energy share last week, with an
alternative proposal to pay 700 pence in cash plus one 'nuclear power note', an
instrument linked to British Energy's future performance.
EDF is also close to a deal with private equity group Kohlberg Kravis
Roberts & Co that it hopes could trump Warren Buffett's agreed takeover of
Constellation Energy Group Inc, the Financial Times reported late on Wednesday.
(Reporting by Zaida Espana; Editing by Greg Mahlich) ($1=.5653 Pound)
($1=.7170 Euro) Keywords: EDF/LOAN
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