Bank of China contributes to a $4.35 billion USD syndicated loan to Reed Elsevier to finance its acquisition of ChoicePoint, Inc

Project narrative

In late April 2008, a syndicate of 21 banks — including the Bank of China (BOC) — entered into a $4.35 billion USD syndicated multi-currency term loan agreement with Reed Elsevier Group plc — an England and Wales-incorporated Anglo-Dutch publisher and information provider owned equally by England and Wales-incorporated Reed Elsevier PLC (traded on the London Stock Exchange and the New York Stock Exchange)) and Netherlands-incorporated Reed Elsevier NV (traded on the Euronext Amsterdam) — to finance its acquisition of ChoicePoint, Inc. This loan was divided into two $2.175 billion USD term loan tranches: 'Tranche A' with a maturity period of one year and a one-year extension option (which would take it out to March 2010) and an interest rate based LIBOR plus an initial margin of 57.5 basis points (bps) and 'Tranche B' with a maturity period of three years, a final maturity date in March 2011, and an interest rate based LIBOR plus an initial margin of 67.5 bps; both tranches had margins dependent on a ratings grid of the borrower. The loan was available for drawdown in U.S. dollars, euros, and British pounds sterling. BOC committed $180.5 million USD to the loan syndicate. In addition to BOC, the following lenders contributed the respective amounts to the loan syndicate: JPMorgan Chase Bank, N.A. ($299 million USD), Morgan Stanley ($299 million USD), UBS AG ($299 million USD), Bank of America ($270.5 million USD), Barclays Capital ($270.5 million USD), BNP Paribas S.A. ($270.5 million USD), Citigroup ($270.5 million USD), HSBC Bank ($270.5 million USD), Royal Bank of Scotland (RBS) ($270.5 million USD), Sumitomo Mitsui Banking Corporation (SMBC) ($270.5 million USD), and 10 other lenders ($137.9 million USD each). JPMorgan, Morgan Stanley, and UBS were bookrunners, underwriters, and arrangers. The banks launched syndicated of the loan in March 2008, with tickets of $300 million USD and fees of 37.5 bps for mandated lead arrangers and $150 million USD and fees of 30 bps for arrangers. Seven lenders joined as mandated lead arrangers, though their commitments were scaled back to $270.5 million USD: Bank of America, Barclays Capital, BNP Paribas, Citigroup, HSBC, RBS, and SMBC. BOC joined as a mandated lead arranger with a commitment of $200 million USD, which was scaled back to $180.5 million USD. The 10 banks that joined as arrangers had their commitments scaled back from $150 million USD to $137.9 million USD. The facility was closed oversubscribed. The proceeds were used by the borrower to finance its acquisition of ChoicePoint, Inc., an American risk management business that provided technology, software, information and marketing services for the insurance sector to manage economic and physical risks and products for the screening, authentication, and public records sectors. On February 21, 2008, it was announced that Reed Elsevier announced that it had entered into an agreement to acquire ChoicePoint for a total cost of $4.1 billion USD. On September 16, 2008, the U.S. Federal Trade Commission ordered Reed Elsevier to divest ChoicePoint’s AutoTrackXP and Consolidated Lead Evaluation and Reporting (CLEAR) electronic public records services to Thomson Reuters Legal Inc., within 15 days after the acquisition was completed, alleging that a combination of Reed Elsevier's existing electronic public records services through its LexisNexis division and ChoicePoint's CLEAR electronic public records services would eliminate competition, as the two combined account for 80% of the sales of electronic public records services to law enforcement customers. The acquisition was completed on September 19, 2008. In July 2008, $143 million USD of $2.175 billion USD Tranche A were cancelled, leaving the Tranche with $2.032 million USD. Then, upon completion of the acquisition, the full $4.207 million USD was drawn down in September 2008. On January 13, 2009, Reed Elsevier Capital issued $1.5 billion USD in bonds that were used to partly refinance the Tranche A; concurrently, Reed Elsevier was expected to arrange forward start refinancing to replace the maturing debt from the acquisition. It issued €50 million EUR in term debt to repay Tranche A. After these refinancings, Tranche A had an outstanding balance of $470 million USD.