Deutsche Bank Running $4.3B Funding Deal for Apollo Everi/IGT Buy
The major German financial institution Deutsche Bank AG is reportedly managing a $4.325 billion bond/loan arrangement that will, in part, assist in funding Apollo Global Management’s (NYSE: APO) recently disclosed purchase of Everi (NYSE: EVRI) and International Game Technology’s (NYSE: IGT) worldwide gaming and PlayDigital segments.
Unnamed sources familiar with the situation informed Bloomberg that the amounts of the bond and leveraged loan remain unclear at this time. Last month, Apollo caught investors off guard by revealing a $6.3 billion bid for Everi and the two IGT companies. In February, IGT and Everi revealed a $6.2 billion agreement that would lead to the slot machine maker merging with the two IGT divisions.
According to the conditions of the Apollo proposal, the private equity firm will disburse $4.05 billion in total payments to IGT and $14.25 per share to Everi shareholders.
Before Apollo became a potential buyer for those companies, IGT had secured a deal with Deutsche Bank and Macquarie Capital for $3.7 billion in funding to purchase Everi and merge the Las Vegas-based gaming equipment manufacturer with its worldwide gaming and digital divisions.
Schedule for Deutsche Bank Financing for Apollo
Deutsche Bank and Macquarie, also participating in the financing initiative, have a period to arrange bond and leveraged loan sales for the Apollo funding since the private equity firm indicated it anticipates the deal to finalize in September 2025 when it revealed its acquisition plans.
According to Bloomberg, the banks have until that time to issue high-yield bonds and leveraged loans. High-yield corporate bonds, commonly referred to as junk bonds, are bonds that lack investment-grade ratings. Consequently, issuers need to offer that debt at elevated interest rates to offset the heightened risk levels for investors.
Leveraged loans are usually granted to firms with junk ratings, therefore, these loans also have interest rates that compensate lenders for the increased risk. A benefit of leveraged loans is that they are supported by floating rate instruments, which means they are generally less impacted by fluctuations in interest rates compared to fixed-rate bonds.
These tools are often utilized to provide credit to purchasers in mergers and acquisitions and can be backed by assets such as real estate, machinery, and intellectual assets.
Regarding Interest Rates ...
Deutsche Bank and Macquarie may be waiting for the Federal Reserve to reduce interest rates prior to promoting the junk bond and leveraged transactions for Apollo. It is largely anticipated that the central bank will implement that next month, possibly by around 50 basis points.
This would probably lead to reduced financing expenses for high-yield issuers, although the average interest rate on top-rated junk bonds has consistently decreased over the last 10 months.
“US High Yield B Effective Yield is at 6.63%, compared to 6.62% the previous market day and 8.53% last year. This is lower than the long-term average of 8.48%,” according to YCharts.
