Jacobs Douwe Egberts is marketing 7.6 billion euros ($10 billion) of debt after borrowing costs for European leveraged loans fell to the lowest in three years.
The coffee maker met with lenders today in London to offer facilities including a 3 billion-euro term loan B maturing 2021 that pays an interest margin of 3.25 percentage points more than benchmark rates, according to a person familiar with the deal, who asked not to be identified because the terms are private. Companies pay an average 3.94 percentage points for leveraged loans in euros, the lowest since 2011, according to data compiled by Bloomberg.
Jacobs Douwe Egberts is raising the debt to back the merger of Mondelez International Inc.’s coffee business with Amsterdam-based D.E Master Blenders 1753 NV. Proceeds of the financing will help fund a 4 billion-euro payment to Deerfield, Illinois-based Mondelez and refinance about 3 billion euros of loans, according to a report from Moody’s Investors Service.
“European investors will like the liquidity this deal brings to the market,” Stuart Fuller, a London-based loan portfolio manager at ECM Asset Management Ltd., said in a telephone interview. “Leveraged loans have had a slower than expected start to the year for issuance, which, when accompanied by repayments, has caused some pent-up demand.”
Credit Suisse’s Western European Leveraged Loan Index has risen 4 percentage points this year to 96.45, according to a June 6 report from the Zurich-based bank.
Frans van der Grint, a spokesman for Master Blenders employed by Hill & Knowlton Strategies, declined to comment on the financing.
The deal is the largest leveraged loan in Europe this year, surpassing Patrick Drahi’s $6.4 billion of loans raised to back his acquisition of Vivendi SA’s French phone unit SFR, according to data compiled by Bloomberg.
Moody’s said it plans to rate the Jacobs Douwe Egberts debt Ba3, while Standard & Poor’s expects to award the loans a BB grade. Bank of America Corp., JPMorgan Chase & Co. and Morgan Stanley are arranging the loans, people with knowledge of the matter have said.