Banks ready sale of US$10b debt for McAfee buyout

[LONDON] Banks are preparing to launch a US$10 billion jumbo financing backing the leveraged buyout of cybersecurity software maker McAfee, according to people with knowledge of the transaction.

An investor group led by Advent International, Permira Advisers and others agreed in November to buy out McAfee in a deal valuing the company at more than US$14 billion including debt. Banks are now having early conversations with investors in the US about pricing on loans and bonds to finance the deal and will soon officially launch the debt sale, said the sources, who asked not to be identified because the discussions are private.

The debt financing is expected to include a US$5.66 billion first-lien loan, US$1 billion of secured bonds and US$2.3 billion of unsecured bonds, the sources said. The package will also include a US$1 billion revolving credit line, according to a November press statement.

The breakdown of and pricing for the debt is still in flux. Part of the financing will likely be denominated in euros and sold to European investors, the sources said. Early pricing discussions in the US on the first-lien loan and secured bond were for a yield of around 4.5 per cent and about 6.5 per cent on the unsecured notes, the people said.

But these particulars could change after financial markets have broadly weakened over the last week, including declines in equities and surging Treasury yields. US junk bonds on Tuesday (Jan 18) posted their worst 1-day loss since November, on a total return basis.

McAfee is the latest jumbo cross-border financing to hit the markets and the latest buyout funding, as investors eager to put money to work in floating-rate debt are snatching up loans tied to private equity transactions.

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JPMorgan Chase is leading the loan portion of the financing, while Bank of America is leading the bond offerings, the people added. Lenders to the deal are also expected to include Credit Suisse Group, Barclays, Citigroup, HSBC Holdings, Royal Bank of Canada, CPPIB Credit Investments, UBS Group and PSP Investments Credit, according to public documents.

Spokespeople for JPMorgan and a representative for Bank of America declined to comment. Representatives for Advent and Permira weren't immediately able to comment.

PSP and investment funds managed by Neuberger Berman have agreed to provide the investor group with preferred equity, according to the November press statement.

BLOOMBERG