Sainsbury's gets £3.5 billion loan package for Asda buy

By Alasdair Reilly

LONDON (LPC) - UK supermarket Sainsbury's has agreed £3.5bn of syndicated loans to back its proposed £7.3bn acquisition of Walmart's Asda, the company said on Wednesday.

The company will also increase its existing revolving credit facilities to £2bn from £1.45bn to provide the combined companies with financial flexibility.

The acquisition financing comprises a £2bn two-year term loan and a £1.5bn three-year term loan.

The increased revolving credits comprise a £445m three-year facility, a £590m four-year facility, a £665m five-year facility, and a £300m five-year facility.

The acquisition financing closed oversubscribed to new and existing lenders and their commitments were scaled back across all tranches.

Mandated lead arrangers and bookrunners on the acquisition loans were ABN AMRO, Banco Santander, Bank of China, BNP Paribas, Rabobank, Credit Agricole CIB, Deutsche Bank, HSBC, Lloyds Bank, MUFG, Morgan Stanley, NatWest, SMBC and UBS.

Mandated lead arrangers were Banca IMI, Banco de Sabadell, ICBC, Mizuho, Raiffeisen Bank International and Standard Chartered Bank. Svenska Handelsbanken also participated.

HSBC is also facility agent on the financing.

The revolving credits were originally arranged in October 2017 via a club syndicate of Banco Santander, Barclays Bank, BNP Paribas, Deutsche Bank, HSBC (facility agent), Lloyds Bank, MUFG, Morgan Stanley, Rabobank (coordinator), Royal Bank of Scotland, Svenska Handelsbanken and UBS.

Under the terms of the merger, US-based Walmart will sell Asda to Sainsbury's in return for a 42% stake in the combined company and £2.875bn in cash, valuing Asda at around £7.3bn.

The merged business will bring together UK brands Sainsbury's, Asda and Argos and will overtake Tesco as the UK's biggest supermarket chain.

The new company is expected to have an investment grade credit profile on completion, which is anticipated in the second half of 2019, and to be highly cash generative, which will allow it to delverage quickly.

(Editing by Tessa Walsh)