![]() ![]() The borrower would prefer to avoid certain expensive fees and pricing the permanent financing at the interest rate cap (discussed below) and lenders would prefer to be engaged as the initial purchasers on the permanent financing (usually high yield bond) rather than assume such a large balance sheet liability. However, bridge loans carry significant risk. Traditional bridge loans are temporary loans with an initial maturity of one year or less, put in place to bridge a potential gap between the announcement of an acquisition until a company can secure permanent financing. ![]() Certainty of funds is required both for regulatory reasons for financing the acquisition of listed companies in Europe (i.e., under the UK takeover code cash consideration should be available to proceed with a bid), as well as practical considerations, such as providing assurance that both private equity buyers and corporate buyers can raise the necessary funds to support their bids during an auction process. ![]() ![]() In "The Basics of Bridge Loans", the White & Case team explains the key terms of bridge loans and discusses some challenges faced in the current market.īridge loans serve as an essential way that a potential acquirer demonstrates its ability to fund an acquisition. Morgan, Goldman Sachs, Bank of America Merrill Lynch, and Barclays Capital in February 2011 and increased the size of the facility to $2.5 billion in September.Bridge loans are a key way to finance large acquisitions, but their terms are very specialized. The company entered into its previous revolver with Morgan Stanley, J.P. Palo Alto, Calif.-based Facebook in February filed papers to raise at least $5 billion through an IPO. The bridge loan matures one year after the funding date, but no later than June 30, 2014. Facebook paid undisclosed origination fees at closing and will pay an additional 20 bps upfront fee, which is payable on the funding date. If the bridge has not funded by 90 days after Facebook entered into the bridge facility, there is a 10 bps commitment fee on undrawn amounts. Pricing on the bridge opens at L+100, with a 25 bps increase 180 days after the funding date.įacebook can borrow under the facility in a single draw once the IPO closes or 240 days after the IPO closing date. Facebook also pays a 10 bps commitment fee. Facebook is not rated, but the pricing on the deal is in line with recent single-A deals as reported by LCD News. Morgan and Morgan Stanley acted as joint lead arrangers for the bridge loan, with Goldman Sachs, Bank of America, and Barclays listed as joint bookrunners. Morgan acted as sole lead arranger for the revolver, with Morgan Stanley, Goldman Sachs, Bank of America Merrill Lynch, and Barclays Capital listed as joint bookrunners. The bridge facility is available to fund tax withholding and remittance obligations related to the settlement of restricted stock units in connection with the proposed IPO, the filing said. Facebook this afternoon disclosed that it has obtained a $5 billion, five-year unsecured revolver to replace a $2.5 billion revolver that was set to mature in 2016, according to a regulatory filing. In connection with its planned IPO, the social-networking site also disclosed that it has obtained a $3 billion bridge loan. ![]()
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