Broadcom Inc. has secured up to $28.4 billion in new debt commitments to fund its purchase of VMware Inc. and replace a shorter-term loan it had snagged as it awaits regulatory approval for the deal.
The commitments are split between two $10.7 billion term loans and a $7 billion term loan, according to a Wednesday filing. The loans — which can be increased by as much as $2 billion — will replace a $32 billion bridge loan that Broadcom entered into last year to fund the acquisition. Bank of America Corp. is acting as the administrative agent for the agreement.
The new financing for what could be one of the largest technology deals in history gives Broadcom more time to decide when to turn to the high-grade debt market for its funding needs. Its proposed $61 billion takeover of VMware is undergoing a lengthy regulatory approval process. While the UK’s antitrust watchdog gave the deal interim clearance in July, Broadcom is still waiting for the US Federal Trade Commission, which is yet to decide whether to litigate on it.
Broadcom and VMware didn’t respond to requests for comment. BofA declined to comment.
“Typically a bridge [maturity] is 12-18 months and assuming they still see the deal closing in the fourth quarter, they do need to get on the horse a bit,” said Noel Hebert, credit strategist at Bloomberg Intelligence.
Because the term loans are set to mature in two, three and five years, Broadcom may consider switching them out with fresh debt later, assuming funding costs come down, he said.
“The advantage to the issuer of this financing approach is the flexibility in securing committed term bank financings with the ability to wait out bond markets until conditions are favorable,” said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.
The San Jose, California-based company isn’t the first one this year to replace a bridge loan with term loans. Biogen Inc. in July said it is planning to replace its $1.5 billion bridge loan with two term loans. Any kind of loan taken out by an investment-grade company is typically funded later in the bond market.
Last year, Oracle Corp. used a $5.7 billion term loan to reduce its $15.7 billion bridge loan and then sold about $12 billion in new investment grade bonds in November and in February to fund the commitments.
Broadcom first announced the initial bridge loan in May 2022, one of the biggest blue-chip financing packages since banks committed $41.5 billion in 2021 to fund AT&T Inc.’s spinoff and merger of its media business with Discovery Inc., according to data compiled by Bloomberg.