(Jan 14): Bankers are competing to provide up to £3 billion (RM16.52 billion) of debt financing to back a potential sale of the homecare assets of Reckitt Benckiser Group plc.

Lenders are putting together multi-currency deal offers that would tap investor appetite in both the leveraged loan and high-yield bond markets, according to people familiar with the matter. The debt will mainly be denominated in euros and dollars due to the greater liquidity of those markets, the people said, who asked not to be identified because the matter is private. 

The banks’ proposals range from £2 billion to £3 billion, the people said, around six times the unit’s £350 million to £400 million earnings. The senior debt package will also offer a revolving credit facility. Some financings will include a slice of junior capital, which would push overall leverage higher, the people said.

Given the generous fees on offer, the financing of leveraged buyouts is one of the most lucrative and profitable parts of investment banking. With relatively few M&A deals currently in the market, banks have been clamouring for spots on buyout deals. Twenty-two banks recently signed up for a role in the acquisition financing for a stake in Sanofi SA’s consumer health division.

In July, Reckitt unveiled plans to sell some of its non-core homecare brands and to review options for its infant formula business. As the consumer giant’s sellside adviser, Morgan Stanley is working to gauge interest in brands including Airwick air fresheners and Cillit Bang, with an auction process due in February, the people said. The unit could fetch more than £6 billion, Bloomberg previously reported.

The bank is also offering a staple financing package — a form of pre-agreed funding to potential bidders for an acquisition — to all interested parties, the people added. 

Such arrangements can make a sale process more attractive as they offer potential buyers the certainty they can acquire the debt they need to complete the purchase. They also offer a benchmark that other lenders can try to beat.

Spokespeople for Morgan Stanley and Reckitt Benckiser declined to comment.

Bloomberg reported in November that the sale had attracted interest from buyout firms including Advent International, Apollo Global Management Inc, Clayton Dubilier & Rice and PAI Partners. 

The UK-based company is seeking to divest itself of certain homecare assets in order to focus on “power brands” like Strepsils lozenges, the Mucinex cold remedy, Gaviscon heartburn medicine and Durex condoms, along with some disinfectants like Dettol and Lysol that boomed during the pandemic.

The market for leveraged buyout financing is picking back up again after years of sluggish deal volumes, with banks lining up funding for Clayton Dubilier & Rice’s purchase of the Sanofi stake and CVC’s buyout of CompuGroup Medical.

Lenders are also pitching to provide debt packages for the potential sales of Spanish waste-management company Urbaser SA and Unilever Plc’s ice cream business, in case the company opts for a sale to private equity firms instead of a public listing.

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