The prospects that Roche, the Swiss drug maker, can raise a $45 billion syndicated loan to finance the buyout of the rest of Genentech, the U.S. biotechnology group, are becoming increasingly remote.
The sheer size of the jumbo deal would eclipse the shrinking corporate loan market — a fact that senior banking sources say is putting pressure on Roche to consider alternative financing options. These could be a combination of loans, bonds, equity and cash.
‘‘The question is about size. In light of the current climate, a $45 billion loan looks large. It would have to be a combination of everything — Roche would have to print bonds to get the deal done,’’ said a senior banker close to the deal who like others asked about the deal was granted anonymity because of the commercial sensitivity of the situation.
Roche reiterated Nov. 25 that it remained committed to its $43.7 billion bid to acquire the 44 percent of Genentech that it does not already own.
The company has been talking to banks about a jumbo loan since July and has repeatedly said that it is confident of obtaining financing for the deal, despite deteriorating market conditions.
The exact size of the loan that Roche has been seeking was never disclosed, but senior bankers said that the company was discussing a $45 billion figure.
Banks, however, are not underwriting any new loans before the end of the year and the drive to deleverage their balance sheets is expected to continue well into 2009, which means that the days of megaloans are over.
One head of loan syndications said, ‘‘$45 billion was always right out there, it was the top of the market even in the good old days and I just don’t see that number being attainable any time soon.’’ Bankers dismissed speculation that the cancellation of BHP Billiton’s $55 billion loan last week as the mining conglomerate dropped plans to take over Rio Tinto might increase Roche’s chances of securing a huge loan.
‘‘The release of BHP’s capital doesn’t make Roche more viable,’’ the syndicate head said. ‘‘You would be replacing one problem with another — a big funded asset that you can’t sell. It’s not a credit issue; it’s a bank balance sheet issue.’’ Roche has significant capital resources, with more than 10 billion Swiss francs, or $8.2 billion, on its own balance sheet as of June 30. This, along with cash on Genentech’s balance sheet and Roche’s own cash flow, could reduce the amount of debt to raise, bankers said.
The corporate bond market has recently reopened, but issuance remains patchy and expensive as the end of the year approaches. Bankers speculate that any deal could take quite some time.
‘‘For the moment, there are no real developments—it’s in abeyance—but this is a very good and highly rated company in a good industry with a strong bank group,’’ the senior banker close to the deal said.