Tue Oct 1, 2013 11:24am EDT
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By Tessa Walsh
LONDON Oct 1 (Reuters) - Nestle has signed two syndicated loans totalling 10 billion euros ($13.54 billion) with Europe's cheapest loan pricing, which the Swiss food group will use for general corporate purposes, the company said on Tuesday.
Although loan pricing has been falling for top companies in Europe's syndicated loan market, Nestle opted to keep the terms the same as its existing loan, which set a European borrowing benchmark in 2011 and remains unmatched to date.
AA/A2 rated Nestle has been able to achieve the cheapest pricing in the European loan market due to a high credit rating and the amount of ancillary business that the global company can offer lenders.
"This is a standby liquidity facility and banks feel that there is an appropriate return to make on their capital commitment going forward," a loan syndicate head said.
The deal consisted of two 5 billion euro equivalent revolving credits which can be drawn in dollars and euros. One of the loans has a 364-day maturity with a one-year extension option. The other has a five-year maturity and includes a $2.5 billion swingline.
Nestle is paying a margin of 10 basis points (bps) on the 364-day loan and 12.5 bps on the five-year loan.
The loans are intended to be undrawn, so Nestle is paying only 1 bp commitment fee on the 364-day loan and 3.75 bps on the five-year loan. The deal also included utilisation fees that will be paid if the deal is drawn.
The loans are already so cheap that Nestle was reluctant to reduce pricing further to ensure a smooth syndication, bankers said.
"Reducing pricing would have risked friction for marginal benefit. Nestle wanted the deal to go smoothly and get it done well with a good group," the syndicate head said.
The deal raised a significant oversubscription after a total of 36 banks joined the deal across the two facilities, but Nestle did not need additional funds and decided not to increase the loans.
The loan was self-arranged by Nestle and co-ordinated by active bookrunner Citigroup. ANZ, Santander, Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, ING, JP Morgan, Royal Bank of Canada, Royal Bank of Scotland, Societe Generale, Standard Chartered Bank and UBS were bookrunners on both loans.
Bank of China, Credit Agricole and Wells Fargo acted as bookrunners on the short-term loan. ($1 = 0.7387 euros) (Editing by Chris Mangham)
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