Paying back jumbo loans in times of the credit crunch

InBev was lucky to secure such a large loan to finance its takeover of Anheuser-Busch. Banks are currently imposing much more stringent conditions for corporate borrowers, in a reversal of the balance of power during the years of plentiful credit.

Lenders are forcing companies to accept loans that require a refinancing of as much as half of the funding within a year as they look for ways to rapidly cut large debt exposures.

Belgian brewer InBev is financing its USD 52 billion acquisition of Anheuser-Busch with a USD 45 billion loan, the first USD 7 billion of which it has pledged to repay within the next 12 months with the proceeds of disposals it is expected to make.

Bankers say that InBev’s loan, which commits the company to a series of refinancings over the next few years, is the most high profile example of the terms being demanded to secure funding for large acquisitions.

Global M&A deal volumes fell dramatically in the first half of this year compared to last year’s record. However, advisory businesses generated nearly USD 10 billion of revenues in the first six months of the year, with fees from deals of more than USD 1 billion responsible for USD 5.7 billion of the total, a 21 percent decrease on the same period last year. Bankers said they do not expect a substantial revival in deal volumes this year, but said the business has remained steady.

Banks are able to command a premium for providing financing and are able to demand terms that guarantee their ability to manage down a position over time.