AT&T Spinoff Starts Marketing $41.5 Billion of Merger Loans

The new entity that will house the merged AT&T Inc. spun-off WarnerMedia division with Discovery Inc.’s reality-TV empire is starting to market a series of loans to help fund the transaction, according to people with knowledge of the matter.

The facilities include a $31.5 billion 364-day bridge loan, which is expected to be refinanced with longer-term bonds prior to maturity, and a $10 billion term loan in two tranches, the people said. The debt will replace the $41.5 billion in financing commitments already received from Goldman Sachs Group Inc. and JPMorgan Chase & Co., the largest bridge this year. The loans are being marketed to other banks that will join the transaction.

The new company, whose name will be announced this week, has split the term loan into a $3 billion 18-month tranche and a $7 billion three-year portion, said the people, who asked not to be identified discussing a private transaction. The company is also syndicating a $6 billion five-year revolving credit facility, they added.

Representatives for JPMorgan, which is leading the bridge loan and term loan portion, and Goldman Sachs declined to comment. Representatives for AT&T didn’t immediately respond to requests for comment.

AT&T’s decision to spin off its media business marks a major shift in its strategy after years of working to assemble telecommunications and media assets under one roof. The company will reduce net debt by $43 billion through the transaction, putting it on track to drop behind rival Verizon Communications Inc. in the rankings of the most indebted non-financial companies globally, according to data compiled by Bloomberg.

Pricing on the bridge loan consists of a 17.5 basis point ticking fee, a fee of 137.5 basis points over the London interbank offered rate if drawn, and a duration fee of 50, 75, and then 100 basis points every 90 days the loan is outstanding, the people said.

The 18-month term loan has an upfront fee of 5.25 basis points and a drawn margin of 125 basis points over Libor, while the three-year tranche has an upfront fee of 10.5 basis points and a drawn margin of 137.5 basis points over Libor.

The revolver has a 17.5 basis point commitment fee and a 137.5 basis points over Libor drawn margin.

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