(Bloomberg) -- Brookfield Asset Management is asking banks to line up about €9.5 billion (US$10.6 billion) of debt for its potential take-private deal for Spanish pharmaceutical producer Grifols SA, according to people with knowledge of the matter.
The Toronto-based investor has asked banks to put up the funds to refinance Grifols’ existing debt, which includes loans and high-yield bonds, according to the people, who asked not to be named because the talks are private. Participating banks would commit to offer the financing before selling it on to investors.
The funds could be needed as the take-private purchase would trigger a clause that allows bondholders to demand the company pay them back at above par — well above where some of its bonds are currently trading.
Grifols’ 2028 bonds headed for a record gain after the Bloomberg report was published, jumping more than 6 cents to near 94 cents on the euro, while the company’s shares climbed as much as 6.4 per cent in Madrid.
The debt-raising plans follow the firm saying last month that Brookfield and the Grifols family had agreed to consider a bid. Including debt, the deal would likely rank as the biggest takeover of a publicly-traded European company since at least 2022, according to data compiled by Bloomberg.
Grifols, a maker of medicines produced with blood-plasma, has been struggling to recover from an attack by short-seller Gotham City Research in January. That sent Grifols’ shares and bonds into a tailspin, and the volatility was compounded over subsequent months by a trickle of bad news, including concerns over cash flow and accounting adjustments on investments in China. The company sought to calm investors by naming new management and removing the family from executive positions.
If the family and Brookfield go ahead with their plans to take the Barcelona-based firm private, the debt package will likely be €8 billion in drawn debt plus a revolving credit facility of as much as €1.5 billion, the people said. Brookfield and a representative for the family declined to comment. Press officers for Grifols didn’t respond to calls and text messages.
The majority of the financing is likely to be in dollars, one of the people said. One bank has offered to backstop the entire amount, another said.
Banks are keen to underwrite big debt packages after a couple of years of moribund deal activity. Lenders are now more confident they can sell the debt on to investors, given market bets that interest rates have peaked.
Brookfield is limited in the amount of new debt it can put on Grifols. The firm’s leverage levels have been under scrutiny and its credit rating has been downgraded by three agencies since March, with Moody’s Ratings ultimately dropping coverage in July.
Mark Carney, chair of Brookfield Asset Management, is also chair of Bloomberg Inc.
With assistance from Ben Scent
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