Bank of China (Europe) contributes to a $8.4 billion USD syndicated bridge loan to finance its public offer for all the outstanding shares of Swedish Match AB (Linked to Record ID#104817)

Project narrative

On May 11, 2022, a syndicate of 18 banks — including the Bank of China (Europe) S.A. — signed a $17 billion USD syndicated senior unsecured bridge facility agreement with Philip Morris International Inc. (PMI) — a Virginia-incorporated American multinational tobacco company listed on the New York Stock Exchange and the SIX Swiss Exchange and owner of Marlboro — to finance its public offer for all the outstanding shares of Swedish Match AB. This loan carried a maturity period of 364 days with two-six month extension options after the occurrence of certain events (i.e. closing of the offer). The facility was available for drawdown in U.S. dollars and Swedish krona. Drawings carried an interest rate based on STIBOR (if Swedish krona) or Term SOFR (if U.S. dollars) plus a margin of 0.35% (0 to 90 days from the effective date), then 0.45% (91 to 180 days from date), then 0.60% (181 to 270 days), then 0.75% (271 to 360 days), then 0.95% (361 to 450 days), then 1.15% (451 to 540 days), then 1.35% (541 to 630 days), 1.55% (631 to 720 days), and 1.75% (721 days and thereafter) if the borrower's debt ratings were at or above A- and A3. If one of the ratings was below A- or A3, the margin would be the product of 0.075% and the total number of downgrades in debt rating from A- or A3, respectively, by each Moody’s and S&P plus the applicable interest rate margin corresponding with the applicable time period in the table in clause. The loan contained certain events of default customary for credit facilities. The proceeds were to be used by the borrower to finance its offer for Swedish Match, including related currency exchange, hedging arrangements, and fee and expenses. Record ID#104816 captures Bank of China (Europe)'s contribution. In addition to Bank of China (Europe), the following lenders contributed to the bridge facility agreement: the Jersey Branch of Citibank N.A., Citicorp North America Inc., the London Branch of Bank of America, N.A., the New York Branch of Banco Bilbao Vizcaya Argentaria, S.A. (BBVA), Banco Santander, S.A., Barclays Bank PLC, the New York Branch of Credit Suisse AG, Credit Suisse (Switzerland) Ltd., the Cayman Islands Branch of Deutsche Bank AG, HSBC Continental Europe S.A., HSBC Bank PLC, Mizuho Bank Ltd., Standard Chartered Bank, Sumitomo Mitsui Banking Corporation (SMBC), the London Branch of Wells Fargo Bank, N.A., the New York Branch of Commerzbank AG, and MUFG Bank Ltd. The UK Branch of Citibank Europe PLC as facility agent. The London Branch of Citibank, N.A. and Bank of America Europe Designated Activity Company as joint lead arrangers, joint bookrunners, and underwriters. BOC, Barclays, BBVA, Credit Suisse, Deutsche Bank, HSBC, Mizuho, Santander, SMBC, Standard Chartered, and Wells Fargo served as mandated lead arrangers. Then, on June 23, 2022, a syndicate of 17 banks — including Bank of China (Europe) S.A. — signed a €5.5 billion EUR ($5.8 billion USD) syndicated senior unsecured term loan credit agreement with PMI to finance its public offer for all the outstanding shares of Swedish Match AB. This loan was divided into two tranches: a €3.0 billion EUR ($3.2 billion USD) tranche with a maturity period of three years after the occurrence of certain events and an interest rate based on EURIBOR plus a margin of 0.55%, but if the borrower's debt rating was below A- or A3, it would be equal to the product of 0.075% and the total number of downgrades in debt rating from A- or A3 respectively by each Moody's and S&P plus 0.55%, and a €2.5 billion EUR ($2.6 billion USD) tranche with a maturity period of five years, a final maturity date of June 23, 2027, and an interest rate based on EURIBOR plus a margin of 0.65%, but if the borrower's debt rating was below A- or A3, it would be equal to the product of 0.075% and the total number of downgrades in debt rating from A- or A3 respectively by each Moody's and S&P plus 0.65%. PMI issued a guarantee for this loan. The proceeds were to used by the borrower to finance its offer for Swedish Match and related fees and expenses. Record ID#104817 captures Bank of China (Europe)'s contribution. In addition to Bank of China (Europe), the following lenders contributed to the term loan: Citibank, N.A., the London Branch of Bank of America, N.A., Mizuho Bank, Ltd., the New York Branch of BBVA, SMBC, the London Branch of Wells Fargo Bank, N.A., the New York Branch of Credit Suisse AG, Credit Suisse (Switzerland) Ltd., the New York Branch of Deutsche Bank AG, Barclays Bank PLC, HSBC Continental Europe, HSBC Bank PLC, Banco Santander, S.A., the New York Branch of Commerzbank AG, Standard Chartered Bank, and MUFG Bank, Ltd. The UK Branch of Citibank Europe PLC served as facility agent. The London Branch of Citibank, N.A. and Bank of America Europe Designated Activity Company as joint lead arrangers and joint bookrunners and underwriters. BOC, Barclays, BBVA, Credit Suisse, Deutsche Bank, HSBC, Mizuho, Santander, SMBC, Standard Chartered, and Wells Fargo served as mandated lead arrangers. As a result of entering into the €5.5 billion EUR syndicated loan, PMI reduced the commitments of the 364-day senior unsecured bridge facility from $17 billion USD to $11 billion USD. On September 2, 2022, the 19-bank syndicate — including the Bank of China (Europe) S.A. — entered into an amendment agreement with PMI for the $11 billion USD syndicated senior unsecured bridge facility agreement. On November 7, 2022, PMI borrowed $7.9 billion USD under the bridge facility and on November 10, 2022, it borrowed $0.5 billion USD, a total of $8.4 billion USD drawn down. All amounts borrowed under the bridge facility would become due on November 8, 2023 unless the maturity was extended per the agreement. On November 21, 2022, PMI repaid $4.0 billion USD under the bridge facility. As of December 31, 2022, the outstanding borrowings under the bridge facility amounted to $4.4 billion USD, with $1.1 billion USD commitments remained available for drawing. On November 21, 2022, PMI repaid $4.0 billion USD under the bridge facility. On February 17, 2023, PMI repaid $4.4 billion USD under the bridge facility, with the remaining outstanding commitments ($2.6 billion USD) were cancelled and the bridge facility terminated. On November 7, 2022, PMI borrowed the full €5.5 billion EUR under the term loan facility, of which the €3.0 billion EUR tranche would mature on November 9, 2025 and the €2.5 billion EUR tranche would mature on June 23, 2027. Swedish Match is based in Stockholm, Sweden; it controlled about half the world's market for snus, a Swedish-style snuff that is moist and smoke-free, and was also the global industry leader for nicotine pouches. On May 11, 2022, Philip Morris Holland Holdings B.V. — a Netherlands-incorporated limited liability company and an indirect wholly-owned subsidiary of PMHH — announced an offer for all the outstanding shares of Swedish Match AB at a price of kr106 SEK (kr.161 billion SEK in total; $16 billion USD). The board of directors of Swedish Match recommended the shareholders accept the offer, with the acceptance period expected to begin on or around June 23, 2022 and expire on or around September 30, 2022, with the offer expected to close by the fourth quarter of 2022, subject to customary closing conditions for an offer governed by Nasdaq Stockholm’s Takeover Rules and the Takeover Act of Sweden, including holders of at least 90% of the outstanding Swedish Match shares (on a fully diluted basis) tendering their shares into the Offer and receipt of all necessary regulatory approvals. On September 2, 2022, activist investor Elliott Investment Management announced that it reached a 5.25% shareholder in Swedish Match, with plans to oppose the bid for Swedish Match under its initial offer. Several other shareholders, including Framtiden Partnerships, announced their opposition to Swedish Match, arguing that the deal did not value Swedish Match's leading role in the growing non-tobacco nicotine pouch market in the United States. The acquisition was viewed as potentially in danger. To ensure the acquisition went through, PMI raised the bid value and cut the shareholder approval requirement. On November 11, 2022, PMI acquired a controlling interest of 85.87% of the total issued shares in Swedish Match. As of December 31, 2022, it had acquired 94.81% of its outstanding shares of Swedish Match. In accordance with the Swedish Companies Act, PMI exercised its right to compulsorily redeem the remaining shares for which acceptances were not received and obtained legal title to the remaining shares, giving a 100% stake in Swedish Match on February 17, 2023.