JPMorgan Chase & Co, others underwrite aggressive Tibco buyout loan: IFR

Fri Oct 3, 2014 11:21am EDT
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(Reuters) - JPMorgan Chase & Co (JPM.N: Quote) has teamed up with unregulated lenders to underwrite a highly leveraged buyout financing for the acquisition of business software maker Tibco Software Inc TIBX.O, which could contravene regulatory guidelines on risky lending, Thomson Reuters IFR reported on Friday, citing sources.

The recent move by the U.S. bank comes just weeks after rival bank Credit Suisse Group AG CSGN.VX was rebuked by the Federal Reserve for failing to adhere to U.S. leveraged lending guidelines.

The sources said the debt package provided by JPMorgan, along with Jefferies, to Vista Equity Partners to finance its$4.3 billion acquisition, had leverage well in excess of eight times and includes loans and bonds.

The overall size of the debt was not known.

The leverage total is higher than the six times ceiling that the Fed, the Federal Deposit Insurance Corp and the Office of the Comptroller outlined as acceptable under new guidelines announced last year as they try to curb reckless underwriting.

"The real story here is that JPMorgan, which is generally deemed to be more conservative and has got the same letters as all other Wall Street banks from regulators about lending, decided to go in with such an aggressive deal," said one of the sources.

"There are huge adjustments to EBITDA (on the deal) and cov-lite loans. It flies directly in the face of regulators."

Market sources told IFR that at least three other banks, including Bank of America Merrill Lynch (BAC.N: Quote) and Deutsche Bank (DBKGn.DE: Quote), had already agreed to lend to Vista.

JPMorgan, who the sources said was originally backing a rival bidder for Tibco, came in at the last minute offering a more aggressive finance package that the company could not turn down and the other banks could not compete with.   Continued...

People walk inside JP Morgan headquarters in New York, October 25, 2013.  REUTERS/Eduardo Munoz