By Laura Mandaro
SAN FRANCISCO (Dow Jones) -- Pfizer, Inc. on Monday gave
taxpayers a glimpse into how banks are using some of the Treasury
Department's $200 billion in bank aid, saying it had lined up $22.5
billion in what would be the largest high-quality bank deal since
March.
The world's top drugmaker (PFE) said it was financing one-third
of its $68 billion takeover of rival Wyeth (WYE) with debt and had
received a commitment from a syndicate of five banks - J.P. Morgan
Chase (JPM), Bank of America Merrill Lynch (BAC), Barclays,
Citigroup (C) and Goldman Sachs (GS) -- for the financing.
If Pfizer uses bank loans for the entire $22.5 billion in debt
built into the deal, as it's expected to do, the financing would
represent the largest bank-loan syndication since
government-sponsored enterprise Sallie Mae (SLM) raised $31 billion
in March, according to Dealogic.
Analysts say the deal shows that where incentives like lucrative
underwriting are on offer, banks are ready to open up their
purses.
"The money is there," said Ken Jaques, senior analyst at
Informa. The banks "are just picking and choosing."
The five banks syndicating the bank debt also advised Pfizer on
the takeover, a typical arrangement in big mergers.
And the deal shows where some of the capital injected into the
banks under the Troubled Asset Relief Program is headed. Some
Congressional lawmakers and President Barack Obama have criticized
the banking industry for not using this capital to increase loans
to consumers and businesses.
"It's good to see that banks are doing what banks are supposed
to be doing," said Pfizer CEO Jeff Kindler on a conference call
with reporters Monday. J.P. Morgan Chase, Bank of America,
Citigroup and Goldman Sachs have all received government aid under
last fall's TARP program.
"Banks are under a lot of pressure to lend," said Leslie Barbi,
head of fixed income at RS Investments, a unit of Guardian Life
Insurance Co. that manages $19 billion in fixed income assets.
Bank lending has been stymied, she says, by banks' constraints
to keep their capital levels high as they write down huge chunks of
bad loans and securities. Plus many would-be borrowers look too
risky as the economy sours.
"I bet they're jumping up and down and clapping hands to lend to
this kind of borrower," said Barbi of the banks in the Pfizer
syndicate. "It's a boon to them."
The bank financing also reflects a revival in high-quality
corporations' ability to access lending markets, which had nearly
shuttered late last year as investors flocked to safe-haven
Treasury debt and cash.
So far this month, companies with investment-grade ratings have
raised $2.3 billion in bank loans - or about 6% of the capital
raised in January of last year, Dealogic says.
Analysts anticipate Pfizer will ultimately issue public bonds to
pay down some of the bank loans. They could be in the $5 billion to
$7 billion range, said Jaques of Informa.
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