It took a consortium of 19 banks to help finance Belgian brewing giant InBev's $52 billion acquisition of Anheuser-Busch Cos. Now those lenders have started the process of selling some of the $45 billion in debt on the open market and they are finding investors more than a little skittish.
Reports are that few buyers have come forward during the initial offering, which coincides with a deepening global financial system crisis. It does not help that the deal is highly leveraged, and that corporate stock values along with loan prices have slipped since the deal was first announced. Banks in the U.S., Japan, England, Germany and other countries have a piece of the financing for this mega beer merger.
The banks are rumored to be selling the loans at approximately 90-cents on the dollar, but may need to discount the debt further. Early indications are the market for corporate debt will be depressed in 2009.
In weighing the risk of coporate loans, investors look at the credit worthiness of the borrowers. Anheuser-Busch InBev is said to be planning to repay a $9.8 billion bridge loan later today, which should be viewed as a positive sign. The company also is selling more than 890 million additional shares of stock to help finance the repayment of acquisition debt. The dilution of the stock caused some investors to dump shares and the price has dropped in recent weeks.
The Belgian company has also been busy reducing costs by cutting hundreds of jobs at A-B, many at the former St. Louis headquarters, and looking at possible deals to sell off parts of the company, such as the Busch Gardens amusement park unit.