Merrill Lynch and Morgan Stanley are leading a $1.9 billion financing package for Burlington Resources' acquisition of Canadian Hunter Exploration, parlaying advisory roles they won quietly when Burlington went straight to them in hopes of minimizing potential leaks of the deal. Dan Hawk, v.p., treasurer, said the company turned to Morgan Stanley for a mixture of relationship and understanding of the business and to Merrill because of its understanding and expertise in the Canadian sector.
Meanwhile, bankers at J.P. Morgan, Burlington's lead lender, are reportedly frosted at the tun of events. "We like J.P. Morgan a lot for the business. It is a strong lead bank," Hawk said. "But to minimize the potential for information leaks we wanted Merrill and Morgan to lead the financing" and did not seek bids.Leigh Pierce, spokeswoman at J.P. Morgan, declined comment.
J.P. Morgan will be joining Morgan and Merrill in the financing, but plum advisory roles are always sought after. In the chess match between commercial and investment banks, commercial lenders are increasingly positioning their lending roles as portals to advisory and underwriting work. One investment banker said the Burlington deal demonstrates the limitations of commercial banks moving in on investment banking business, saying it is much harder to replicate merger and acquisition banking than a high-grade bond business.
But Hawk said that was not the case with J.P. Morgan. He said he considers J.P. Morgan's advisory business to be very strong and said other commercial banks with investment banking arms, such as Citibank, also have strong teams. He conceded, though, that the expertise of Merrill and Morgan in this area was the factor behind the decision to go with them.
Merrill and Morgan Stanley, joint lead-arrangers and joint-syndication agents, will underwrite the $1.9 billion bank line financing, which will be taken out with private and public placements of debt. Hawk said that relationship lenders would be asked to participate on the line, and those that take part in the bridge will lead the future bonds offering. Burlington is leaning towards tapping the 144A market primarily, Hawk stated.