‘There is considerable excitement. This is a confusing and a complex deal and there is a very tight deadline,’ says one of the bidders. ‘They’ve not got much time before they have to award a mandate as, if everything stays on schedule, EU approval for the acquisition is going to be granted soon and the first payment will have to be made by 31 May.’
Under the terms of the purchase, Sabic is to pay for DPC in two equal instalments. As a result the proposed financing package is also being arranged in two halves. The first – due to be paid on 31 May – is itself divided into two components: a Eur 408 million ($355 million) loan which will be used by Sabic as the base equity for the acquisition vehicle; and a Eur 820 million ($713 million) facility made up of different layers with different levels of recourse to Sabic.
The second major tranche stands as a Eur 1,125 million ($979 million) deferred bank guarantee supporting Sabic’s commitment to pay the remainder of the acquisition’s value in four and a half years. It is understood that if conditions defined in the sales contract are met, DSM will be able to monetise the instalment ahead of schedule. This second tranche – unlike the first – will have full recourse to Sabic.
‘If I was a neutral observer this would be a fascinating deal,’ says another bidder. ‘There are so many complex factors it’s very hard to predict where pricing is going to end up – you can safely predict that the spread of bank bids will be very wide.’
The diversity of bids is likely to be compounded by the fact that banks were asked to tender on an individual basis, rather than in consensus-building groups.
‘Pricing this is a nightmare,’ says the second banker. ‘This deal is not a corporate borrowing, it’s not project finance, it’s not European and it’s not Middle Eastern. It has characteristics of them all.’
JP Morgan Chase & Companyis acting as financial adviser on the transaction.