(Bloomberg) -- Mars Inc. has lined up the biggest blue-chip debt financing for a merger and acquisition in nearly a year to help finance its $36 billion purchase of Kellanova.
The packaged food manufacturer inked a $29 billion bridge loan, short-term debt used to help fund acquisitions that is later replaced by longer-term, less expensive corporate bonds, according to a filing. JPMorgan Chase & Co. and Citigroup Inc. are providing committed debt financing for the deal.
That marks the biggest bridge loan this year, according to data compiled by Bloomberg. It’s also the largest investment-grade debt financing for an M&A deal since August last year when Broadcom Inc. got up to $28.4 billion in new debt commitments to fund its purchase of VMware Inc.
The new financing package comes at a time when the pipeline for high-grade loans supporting M&A is largely empty, with Owens Corning’s $3 billion committed financing for its acquisition of Masonite International Corp. in February being the last. Only a handful of bridge loans have been announced, while companies have also successfully replaced their bridge loans in the bond market earlier in the year.
“This is an example of an issuer with a unique profile (highly rated, not currently a mega-issuer) feeling more confident about a deal given recent strength in primary market execution,” Winifred Cisar, global head of strategy at CreditSights Inc. said in a response to questions.
The deal is expected to close in the first half of 2025, giving the company a bit of time to refinance in the bond market. It’s potential bond sale could “add some options for credit investors,” according to Bloomberg Intelligence analyst Julie Hung, given that spreads in the consumer sector have been trading tighter to other sectors.
Mars could also be facing some credit ratings pressure, Hung said. Mars has about $14 billion of outstanding debt, according to data compiled by Bloomberg. With the $29 billion of committed financing, it’s likely leverage will increase, she added, which credit graders typically view as a negative.
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