Bank Of America & Citigroup Sell Chunks Of $57.5B Bridge Loan For Skydance’s WarnerDiscovery Pursuit To Derisk Capital Exposure With Apollo – Even With Investment-Grade & Unsecured Junk Bonds, Debt Package Also Includes 3-Year & 5-Year Term Loans A (Typically Reserved For Banks) & B (For Investors).

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“Bank of America Corp. and Citigroup Inc. have started selling chunks of a $57.5 billion bridge loan backing Paramount Skydance Corp.’s takeover of Warner Bros. Discovery Inc., in a syndication that could wrap up by the end of next week.

The two banks, along with Apollo Global Management Inc., agreed to provide one of the biggest ever bridge financings, for the buyout that was announced last month after a protracted bidding war.

Bank of America and Citigroup are now seeking additional lenders to help syndicate the three firms’ combined exposure, according to people with knowledge of the matter.

The expectation is that the lender trio will keep a larger chunk of the financing than the other banks that are brought into the bridge, carving themselves a bigger slice of the fee pool that’s available, the people said, who asked not to be identified discussing private information.

The Warner Bros. buyout is one of a string of recent large financings. A $20 billion financing backing the buyout of Electronic Arts Inc., initially underwritten on a sole basis by JPMorgan Chase & Co., had 20 banks in the lender group, while 22 banks are on a jumbo debt financing backing the acquisition of packaging firm Sealed Air Corp.

Complex Mix

The company plans to later refinance the temporary funding with a combination of investment-grade and junk debt. Typically, borrowers opt for either investment-grade financing or leveraged financing, rarely both in combination, making this a complex debt deal that could be sold to a broader number of investors.

The majority of the financing will consist of investment-grade secured bonds, said the people. Apollo’s insurance business is expected to take a large chunk of the investment-grade bonds, the people added.

The debt package is also expected to include three and five-year term loan A’s, loans typically reserved for banks, as well as term loan B, for investors.

There will probably also be unsecured junk bonds, the people said.

The leveraged part of the transaction is projected to total between $10 billion to $15 billion and is expected to be sold to institutional investors in the third or fourth quarter, the people added.

Representatives for Paramount, Warner Bros., and Bank of America didn’t immediately comment. Spokespeople for Citigroup and Apollo declined to comment.

Earlier this month Fitch Ratings cut Paramount Skydance Corp.’s credit ratings to junk, specifically to BB+, the highest junk rating. S&P Global Ratings has the company at the same level, and may cut the company’s grade. Moody’s Ratings is looking at cutting Paramount Global to junk. With at least two high-yield ratings, Paramount is ineligible for many investment-grade bond indexes.”