Bacardi deemed a success as banks recognise a good brand

  • 01 Jul 1998
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The $2.6bn credit facilities arranged by Goldman Sachs for Bacardi's purchase of Sapphire Bombay Gin and Dewar's Scotch Whisky from Diageo featured perhaps the most successful senior syndication of the first half of the year.
Sub-underwriters committed a staggering $5.75bn to the $2.6bn credit facility. Many believe the blow-out transaction showed the depth of demand for the right name in the syndicated loan market.
Indeed, the deal triumphed despite early criticism that the pricing, which ranges between 25bp and 45bp over Libor, was too tight for an acquisition-related facility arranged for a Bermuda-based company.
The deal was also launched at a time when banks were becoming increasingly choosy. In addition, a number of LBO and MBO facilities were struggling in syndication due to structures that were seen as overleveraged, or in sectors that were vulnerable to economic downturn.
Goldman had originally planned to bring in only about three or four joint lead arrangers. Because of the enormous demand, it enlarged the group and took in eight, underwriting $250m each.
The co-lead arranger and co-arranger groups were also well strongly backed with 13 banks coming in. However, when the deal was first launched, Goldman encountered criticism over the pricing - many thought it should have been higher.
But the strength of the borrower shone through. "Banks who came into the deal recognised that Bacardi is a brand known throughout the world," says Oliver Duff, a member of the credit sales team at Goldman Sachs.
"It has extremely strong cashflows and high profit margins. The actual purchases were important too. Bombay and Sapphire fill a gap in the market for Bacardi and they can only make the company stronger. It is also rare for a drinks company to pick up established and highly successful brands."
Sub-underwriters were also attracted to the deal as it is likely that $1.1bn of the facility will be taken out in the capital markets soon after general syndication has been closed.
The deal is split into four tranches - a $500m one year term loan (tranche 'A') priced at 25bp over Libor, a $700m three year term loan (tranche 'B') priced at 30bp over Libor, a $800m five year term loan (tranche 'C') priced at 37.5bp and a $600m seven year standby facility (tranche 'D') priced at 45bp.
However tranche 'D' is likely to be undrawn and cancelled as there is strong support from Bacardi's existing private placement investors. And tranche 'A' will be reduced over time and taken out by a Eurobond of up to 10 years. Therefore lenders are effectively lending to a $1.5bn deal priced as a $2.6bn deal. EW

  • 01 Jul 1998

All International Bonds

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1 Citi 253,106.92 930 8.89%
2 JPMorgan 230,914.50 1036 8.11%
3 Bank of America Merrill Lynch 221,389.46 762 7.78%
4 Goldman Sachs 171,499.26 554 6.03%
5 Barclays 169,046.60 646 5.94%

Bookrunners of All Syndicated Loans EMEA

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4 BNP Paribas 19,315.94 110 5.26%
5 Credit Agricole CIB 18,706.93 106 5.09%

Bookrunners of all EMEA ECM Issuance

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1 JPMorgan 12,578.87 55 8.17%
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3 UBS 10,682.06 44 6.93%
4 Goldman Sachs 10,419.53 53 6.76%
5 Morgan Stanley 10,194.88 57 6.62%