(Bloomberg) -- Goldman Sachs Group Inc.’s private-lending arm and Sixth Street Partners are leading a group of direct lenders providing part of the $5.5 billion acquisition financing for Blackstone Inc.’s purchase of a majority stake in Emerson Electric Co.’s climate technology business.
The private term loan is $2.6 billion, according to people with knowledge of the matter, who asked not to be identified discussing a private transaction.
The unique structure, which combines a portion of financing by banks with another via private lenders, is a sign of the challenges haunting private-equity firms that need acquisition financing this year. Volatile markets and evaporating risk appetite have turned banks away from underwriting debt for acquisitions and leveraged buyouts, which is typically sold to institutional investors.
The private-credit loan is being provided by 10 lenders, with the largest two only ponying up $500 million each, according to people familiar with the matter. Direct lenders have pared back the amount they are willing to provide to any one deal amid a surge in demand for direct loans and worry about a recession.
Blackstone and Apollo Global Management Inc. are among the private-credit lenders providing the funding for the deal, according to the people, as are Blue Owl Capital Inc., HPS Investment Partners, GoldenTree Asset Management, PSP Investments, Carlyle Group Inc. and Benefit Street Partners. Pricing on the loan is 675 basis points above the benchmark rate, according to the people.
In addition, a $2.9 billion term loan from a group of banks rounds out the funding package. The so-called term loan A -- financing that is typically held by banks and not sold to institutional investors -- is being led by Royal Bank of Canada, Wells Fargo & Co. and Sumitomo Mitsui Financial Group Inc.
BNP Paribas SA, HSBC Plc, Mizuho Financial Group Inc., Barclays Plc, JPMorgan Chase & Co., Goldman Sachs and Truist Financial Corp. are also involved, according to some of the people.
Blackstone is contributing $2.4 billion of equity and $2 billion in convertible preferred shares. There’s also a $2.25 billion of seller financing provided by Emerson that matures in a decade.
Representatives for Goldman Sachs, Sixth Street, Blackstone, Emerson, Apollo, JPMorgan, Barclays, Mizuho, Truist, HPS, GoldenTree and PSP declined to comment. RBC, Wells Fargo, BNP, HSBC, Blue Owl, Carlyle and Benefit Street didn’t respond to requests for comment. SMBC didn’t immediately comment.
The deal is expected to close in the first half of the calendar year 2023.
--With assistance from Silas Brown and Davide Scigliuzzo.
(Adds more detail on other lenders starting in fifth paragraph.)
©2022 Bloomberg L.P.
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