Deutsche Bank AG, one of Germany’s leading financial institutions, is reportedly spearheading a $4.325 billion bond and loan deal to support Apollo Global Management’s acquisition of Everi Holdings and two business units from International Game Technology (IGT). The deal, associated with Apollo’s unexpected $6.3 billion bid for the gaming entities, was unveiled last month, catching many investors off guard. As part of the proposal, Apollo plans to disburse $4.05 billion in gross proceeds to IGT and offer $14.25 per share to Everi shareholders.
This new twist follows an earlier announcement in February where IGT and Everi had disclosed a $6.2 billion merger agreement, aiming to unify Everi’s operations with IGT’s global gaming and PlayDigital units. Prior to Apollo’s emergence as a bidder, IGT had already secured a $3.7 billion financing package with Deutsche Bank and Macquarie Capital, intended for the acquisition and subsequent integration of Everi.
Bloomberg, citing unnamed insiders, reveals that the exact size of the forthcoming bond and leveraged loan remains undisclosed. However, Deutsche Bank and Macquarie have a window until September 2025 to finalize these financial instruments, constrained by the anticipated closure of Apollo’s acquisition within this timeframe. These banks are strategizing to sell high-yield bonds and leveraged loans to fund the transaction, despite the inherent risks recognized by the lack of investment-grade ratings, which necessitate higher interest rates to attract investors.
Leveraged loans, frequently extended to firms with lower credit ratings, similarly carry higher interest rates to mitigate the increased risk for lenders. They are often secured by assets such as property, equipment, and intellectual property, offering some protection to lenders. These instruments are a common mechanism in financing mergers and acquisitions due to their backing by floating rate instruments, rendering them less sensitive to interest rate fluctuations compared to fixed-rate bonds.
Amid speculation, it’s possible that Deutsche Bank and Macquarie are strategically waiting for a reduction in interest rates by the Federal Reserve before moving forward with marketing these financial deals. Market sentiment anticipates a potential rate cut by the central bank as early as next month, possibly by 50 basis points. Such a move could lower financing costs for high-yield issuers, which have already experienced a decline in interest rates over the past ten months. According to YCharts, the US High Yield B Effective Yield currently stands at 6.63%, down from 8.53% a year ago, and below the long-term historical average of 8.48%.
