22nd Jan 2019 11:39
LONDON (Alliance News) - Brexit is making it difficult for companies to buy UK assets as lenders are shying away from sterling-denominated loans, Bloomberg News reported Tuesday.
Private equity firm Apollo Global Management LLC has, according to Bloomberg, had to fund the majority of its offer for FTSE 250-listed packaging maker RPC Group PLC in dollar and euro loans.
Bloomberg quoted people close to the deal saying the small portion of the deal that is funded in sterling is more expensive than the other currencies because lenders fear that a no-deal Brexit will damage the UK economy. This could cause the pound to fall further.
The same sources told the financial news agency that auctions to buy assets in Melorose Industries PLC and United Technologies Corp fell through earlier in the year as lenders were reluctant to finance the deal.
United Technologies cancelled the sale of its Chubb fire-safety and security business, citing "recent market volatility". Bloomberg said this was caused by prospective buyers coming in below expectations.
Sales of UK assets are down 76% year-on-year, at USD3.8 billion, with Bloomberg attributing this to bank lenders reluctance to underwrite UK company risk on Brexit fears.
Bloomberg quoted Eaton Vance Management portfolio manager Jeff Mueller, who said sterling is still attractive on a valuation basis "but the path to returns could be bumpy given the range of outcomes for Brexit".
https://www.bloomberg.com/news/articles/2019-01-22/brexit-is-said-to-cut-borrowers-access-to-pounds-risking-m-a
On Monday, the Wall Street Journal had reported that Apollo is in advanced talks to acquire RPC for more than USD3.8 billion and a deal could be announced as soon as Tuesday.
Similarly, the Financial Times reported Tuesday that the world's biggest infrastructure investors have introduced a "blanket ban" on investing in rail, energy and water project in the UK.
"Several influential" infrastructure investors told the FT that the UK's "very negative" and "hostile" political and regulatory environment means they are "highly unlikely" to make any further investment in the country. They emphasised that this had little to do with Brexit risk, but rather was about government policy.
https://www.ft.com/content/d23400e6-1d6e-11e9-b126-46fc3ad87c65
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