Deals of the Year 2017: Loans above £750m winner

Loan finance with in-built flexibility made the difference in Reckitt Benckiser's winning entry

Winner – Loans above £750m award: Reckitt Benckiser

TT Feb/Mar18 RB

Reckitt Benckiser’s multibillion-pound financing to support last year’s acquisition of Mead Johnson Nutrition brought the consumer goods company the accolade of winner in the Loans above £750m category.

The company, an ACT CPD-accredited employer, impressed the judges with the scale and level of detail within the financing, the pricing achieved and the flexibility built into the deal’s structure, comprising multi-tranche term loans, bridge and revolving credit facilities (RCFs).

Reckitt’s treasury team, led by group treasurer Simon Neville FCT, incorporated a $0.9bn term loan into the acquisition facilities (a $4.5bn three-year term and $4.5bn five-year term loan, $11bn bridge facility, including $3bn to backstop existing bonds and a £1bn five-year RCF) to ensure flexibility in the future.

The proportion of acquisition funding made up of term loans is 45% – significant compared to other deals in the market.

 While the flexibility of the loan led the way for a subsequent bond takeout, the Deals of the Year judges felt the execution set the benchmark for the overall acquisition financing 

Mead Johnson is Reckitt’s largest acquisition to date and has increased Reckitt’s consumer health business by 90% and increased its presence in faster-growing developing markets by 65%. The deal has also transformed the company’s capital structure.

The fully debt-financed acquisition increased Reckitt’s gross debt balance from around £2.4bn at the end of its 2016 financial year to £17.2bn at the deal close in June last year.

The bond transaction is the sixth largest by a UK-listed corporate; the fifth-largest bond transaction issued in maturities out to 10 years only; and the third-largest 144A without Registered Rights ever.

While the flexibility of the loan led the way for a subsequent bond takeout, the Deals of the Year judges felt the execution of the loan set the benchmark for the overall acquisition financing.

“The financing was seen as having groundbreaking terms and structure,” said Neville, “and the bond takeout, followed rapidly by the sale of the food division of Reckitt Benckiser, completed a textbook M&A financing. Alongside this, the wider treasury team rapidly integrated Mead Johnson into our core operations.”

What the judges said

“Reckitt Benckiser’s financing stood out for its sheer size, the well-executed bridge deal and the amount of term tranches arranged.”

Deal highlights

Issuer Reckitt Benckiser

Amount £16.4bn

Structure Senior unsecured facilities including bridge, term loan and RCF

Rating (at time of deal) A3/A-

Currency and tenor $/3yr, 5yr, bridge; £/RCF

Interest rate/coupon Various

Highly commended: Nomad Foods

Frozen food company Nomad Foods, which includes brands Iglo, Birds Eye and Findus in its portfolio, was highly commended in this category for its debt-refinancing work last year.

Nomad’s treasury team, led by head of treasury John Meehan AMCT, refinanced the company’s external debt of €1.5bn and its €80m RCF as a means of improving interest rates, extending maturities, diversifying its sources of funding and increasing flexibility in debt documentation.

Nomad issued a €400m fixed-rate bond, with a seven-year maturity. The company also set up a dollar-denominated term loan of $610m, which was fully swapped back to euros and sterling using cross-currency interest rate swaps at significantly lower rates than they could have issued directly in those currencies by taking advantage of the basis swap.

In addition, Nomad issued a euro term loan of €500m.

Overall, the package brought annual interest savings of €14m or around 1%. At the same time, the company fixed approximately 66% of interest costs, which would have added a further €5m per year under the previous structure.

Meehan succeeded in knocking 100bps off the RCF and extended the term out to six years. All this was achieved over a four-week period.

The judges were impressed by the achievements: the lowered interest costs, low fees and the boldness of the execution. The refinancing also gives the treasury access to a broader base of lenders, a feature that will pay dividends in the future in the event of fundraising for future M&As.

About The Treasurer's Deals of the Year Awards

The Treasurer's Deals of the Year Awards recognise the outstanding work of treasurers, both within the treasury community and the wider business world. Through them we champion the success and achievements of treasury teams that have stood out in the market over the prior 12 months. Winning an award is a great way to strengthen your organisation's and your treasury's profile, bringing peer and industry acknowledgement. Find out more here.

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