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
By Clay Dillow,  Newser Staff
Posted Jan 27, 2009 9:11 AM CST
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)
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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.