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Netflix is relying on one of the largest loans of its kind to finance its $83bn takeover of Warner Bros Discovery, with a bridge loan led by Wells Fargo to fund the cash portion of its offer.
The bank agreed to stump up half of a $59bn bridge loan to Netflix for WBD. It is one of the largest bridge loans offered to a company to finance an acquisition, according to data provider LSEG, and Wells’ biggest to date.
The financing — codenamed “Project Noble” on lending documents — underscores Wells’ ambition to cement its investment banking bona fides as the San Francisco-headquartered bank looks to go head-to-head with rivals including JPMorgan Chase, Bank of America and Goldman Sachs.
The bank earlier this year was relieved of an asset cap that limited its ability to grow in the wake of its fake accounts scandal, and the transaction for Netflix shows how it is willing to use its balance sheet to win business.
Wells was joined by BNP Paribas, which committed to finance $20.7bn of the loan, and HSBC, which agreed to provide just under $9bn. It is also the largest bridge loan BNP has written for a corporate client, said a person briefed on the matter.
The loan is referred to as a bridge because it is short term in nature, covering the gap until Netflix taps bond and loan investors for longer-term debt.
Wells Fargo, BNP and HSBC will lead what looks to be a lucrative financing when Netflix eventually borrows that longer-term debt, with plans for a $25bn unsecured bond offering, $20bn in new loan facilities and $5bn new revolving credit facility, paperwork filed with US securities regulators showed.
Netflix chief financial officer Spencer Neumann acknowledged on a call with investors on Friday that the deal would increase the company’s indebtedness.
“We’re committed to maintaining a healthy balance sheet and our solid investment-grade credit ratings,” he said. “We expect pro forma leverage to be elevated at closing, with a clear plan to bring that back under rating agency targets for our current ratings within two years after closing.”
The initial banks to underwrite a bridge loan typically bring in other lenders after a deal is announced and confidentiality is no longer at a premium.
The bidding war for WBD also meant big financiers on Wall Street had to choose a single company to back, as Paramount and Comcast made competing offers for the business.
WBD’s own advisers, which include the largest US bank JPMorgan, are also typically limited from financing a buyout offer. JPMorgan in June provided a $17.5bn bridge loan to WBD when the company announced it would split itself in two, hiving its studio and streaming assets away from its television networks.
Wells and BNP declined to comment. HSBC did not respond to a request for comment.
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