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MONDAY, NOVEMBER 23, 2009
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 ANALYSIS 
3

Pfizer Deal's $22.5B in Loans Hasn't Unlocked Credit

$22.5B loan in deal to acquire Wyeth comes at 7-9% interest, and lenders can walk

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(Newser) – Think Pfizer’s $68 billion deal to buy Wyeth, financed in part with $22.5 billion in loans, means credit markets have thawed? Think again, the Wall Street Journal reports. Pfizer’s lenders—including JPMorgan, Bank of America, Goldman, and Citigroup—are charging high interest (7%-9%, with loans due in a year) and can walk if Pfizer’s credit rating drops below investment-grade.

Wyeth is also guaranteed a $4.5 billion break-up fee if Pfizer’s rating drops and the banks balk—about double the usual penalty for such transactions. “Introducing a ratings condition was not popular, but they took comfort in the high credit quality of Pfizer,” a source said of Wyeth. Standard & Poor’s placed Pfizer’s triple-A rating on downgrade watch on news of the deal, citing the added leverage.

The lenders helping Pfizer finance its buyout of Wyeth are charging interest of 7-9% on a $22.5 billion loan, and can walk away if the drug giant's credit rating worsens significantly.
The lenders helping Pfizer finance its buyout of Wyeth are charging interest of 7-9% on a $22.5 billion loan, and can walk away if the drug giant's credit rating worsens significantly.   (AP Photo)
Wyeth's Advil likely came in handy for lenders working on the Pfizer-Wyeth deal, and for company executives who aren't done worrying about whether the buyout will actually go through.
Wyeth's Advil likely came in handy for lenders working on the Pfizer-Wyeth deal, and for company executives who aren't done worrying about whether the buyout will actually go through.   (AP Photo)
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We realized there's a new world out there. You can't get blood from a stone.
- Source close to Wyeth, on the company's unique financing deal with Pfizer

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3 comments
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Reader2795
Jan 27, 09 10:07 AM CST
Banks will take risks only at rapid interest rate return that goes to recapitalize the industry. In order to free up credit, with Capital Markets showing no interest will be to nationalize the industry and restart with common lending sense, something today's bank managers are unable to comprehend, do to the loss of brain cells over the last 10 years of deregulation, and big money for no risk, they are still hungover. Reply
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timothymoorley
Jan 27, 09 4:45 PM CST
PFIZER COVER UP OVER MEDICATION CELEBREX IN CANADA This is a very real situation and the media so far is being very sheepish! My FACTS are rock solid!!!!!! I will not be bought off! I will not let their lawyers make the suggestion AGAIN! They already have!!!!! the following is a link to a YOUTUBE video. Please watch and resend the Video! THANK YOU! http://ca.youtube.com/watch?v=6xmoOmDpZoQ ... MAINSTREAM MEDIA ARE ACTING VERY SHEEPISH The Americans that have been hurt by this medication are being taken advantage of. Pfizer should not be getting away with this in our PROGRESSIVE COUNTRIES . This concerns AMERICANS as much as it does CANADIANS. I STAND STRONG!!DAY 32 and counting HUNGER STRIKE The condition in question is known has a Patent Foreman Ovale and it is a hole in the upper chambers of the heart, its this hole that allowed the blood clots that the pill makes to pass into my artery system and cause the occlusion in my leg. That is why when they knew who I was (LEAD PLAINTIFF) during the first 2 times the test was done they created allot of confusion and even tried to lie about doing it the first time. It is why when I went to the Washington state Hospital and they had no Idea of my involvement with the lawsuit they report on the condition correctly. Reply
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radnip
Jan 28, 09 3:11 AM CST
All the banks have to do, besides have income assurance clauses, is to have executive pay, bonus, spending and shareholder payout clauses, all requiring the approval of the lending bank to ensure that their current balance sheet and profitability can be followed. Reply
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