Bankers ready $8.35 billion debt financing for Morrisons sale
Bankers are working on debt financing packages of around 5 billion pounds ($8.35 billion) to back a potential sale of British supermarket chain Wm Morrison Supermarkets to private equity funds, banking sources said on Wednesday.
Morrisons, which is 9.5 percent owned by the founding family, has contacted buyout firms to guage their interest in taking the business private after a fall in Christmas sales.
Cash-rich private equity firms are keen to do new buyouts after low levels of M&A activity in 2013, although the large size of this deal may mean that they have to work together, bankers said.
"The size of the transaction, which could get as high as 10 billion pounds, could require a number of private equity players to team up, given the size of the equity cheque needed," a senior leveraged loan banker said.
Morrisons declined to comment.
Bradford-based Morrisons, which is the UK's fourth-largest supermarket operator, was founded in 1899 and listed on the London Stock Exchange in 1967.
Morrisons, which has lucrative property assets, has already been considered as a takeover target by CVC, which studied a potential bid in 2007.
Morrisons' shareholders and retail analysts are doubtful that a take-private deal will happen but bankers and sponsors have been in talks for more than a month to see if the financing is theoretically possible, a second banker said.
A debt package of around 5 billion pounds would be one of the largest buyout financings since the financial crisis. A financing would be a mix of loans and high-yield bonds in sterling, dollars and euros to maximise liquidity, two bankers said.
The loan component is expected to have an 'opco-propco' structure which is commonly used on loans for companies with property assets. Property company debt is serviced with rent payments from an operating company, they added. ($1 = 0.5989 British pounds)
(Editing by Tessa Walsh)