Narrative
Full Description
Project narrative
On March 18, 2021, financial close was reached on a deal in which a syndicate of at least nine banks — including the Bank of China (BOC) — entered into a syndicated bridge £8,250,000,000 GBP term loan facility agreement ('Facility A') and a syndicated bridge £1,105,000,000 GBP revolving loan facility agreement ('Facility B') — both were signed on March 17, 2021 — with National Grid plc — a British multinational electricity and gas utility — for the £7.8 billion GBP ($10.88259 billion USD) acquisition of UK utility Western Power Distribution (WPD). The proceeds of the £8.25 billion GBP loan were to be used to finance the acquisition of WPD, refinancing WPD debt, and payment of certain costs in connection with the acquisition, while the £1.105 billion GBP loan was to be used to refinance WPD's existing debt. The interest rate was based on the aggregate of LIBOR or the relevant risk-free rate and a margin between 0.55% and 1.5%, subject to a margin rating adjustment mechanism linked to National Grid's unsecured corporate credit rating. Facility A had a maturity period of 15 months from the date of first utilization. Facility B had a maturity period of 12 months from the date of first utilization. Both maturity periods could be extended at National Grid's option for six months each, with Facility A having an additional six month-extension period. In addition to BOC, the following lenders contributed to the syndicated bridge facility: Barclays Bank PLC, Goldman Sachs Bank USA, Goldman Sachs International Bank, Lloyds Banking Group, Banco Santander S.A., BNP Paribas S.A., Canadian Imperial Bank of Commerce (CIBC), and HSBC Bank Plc. Barclays Bank and Goldman Sachs Bank USA served as mandated lead arrangers. Barclays Bank served as agent.. The acquisition was completed on June 14, 2021, with National Grid acquiring PPL WPD Investments Limited, the holding company of WPD from PPL WPD Limited, a subsidiary of PPL Corporation. However, the UK's Competition and Markets Authority (CMA) opened an investigation into the “substantial lessening of competition” of National Grid acquiring Britain's largest power grid business, which operates four distribution networks in England and Wales and services 7.9 million customers. The CMA approved the deal on or around September 1, 2021. The borrower planned to repay the debt with the proceeds of its sale of its Rhode Island gas and electricity business, Narragansett Electric Company, to PPL, and the then- forthcoming sale of its UK Gas Transmission business, with any remaining debt to be refinanced. The £8.25 billion GBP bridge loan was fully repaid in January 2023 after the receipt of the proceeds from the UK Gas Transmission business sale.
Staff comments
1. "Proposed Acquisition of PPL WPD Investments Limited the holding company of the Western Power Distribution group and Notice of General Meeting" from National Grid plc states that Barclays Bank PLC, Goldman Sachs Bank USA, and Goldman Sachs International Bank were the original lenders. IJGlobal's "Acquisition of Western Power Distribution 2021" does not mention any of these banks, but does include BOC and five other lenders. "ACT Deals of the Year Awards 2021: Loans Above £750M winner" states that National Grid invited all 22 of its relationship banks to participate in the acquisition facilities, 'with high participation rates'; suggesting that Barclays and two Goldman Sachs banks syndicated the debt to numerous lenders. It is unclear precisely how many banks participated, but AidData has assumed that the six lenders identified by IJGlobal participated in the same loan as identified by National Grid. However, given the ambiguity on the number of lenders and the large size of the commitments, AidData has not applied the equal contributions assumption to avoid potentially greatly overestimating BOC's contribution. 2. Additionally, it is unclear if just the £8,250,000,000 GBP loan was syndicated, or if just the £1,105,000,000 GBP loan was syndicated as well. Since both maturity periods (1.25 years and 1 year) are known, but whether BOC contributed to each is unknown, AidData has taken the average [(1.25 + 1) / 2] = 1.125 years and coded it as the maturity period for this record. 3. "Share Purchase Agreement PPL WPD Limited and National Grid Holdings One Plc and National Grid Plc" states National Grid plc was the original borrower. IJGlobal's "Acquisition of Western Power Distribution 2021" suggests that Filly Bidco Limited — a special purpose vehicle (SPV) wholly owned by National Grid — was the direct borrower. National Grid may have on-lent to its SPV. This issue merits further investigation.