Tibco Software Inc. (NASDAQ:TIBX) Buy Out Loan: JPMorgan Chase & Co. (NYSE:JPM)’s Aggressive Steps To Grab Loan Portfolio

Chris Brown - October 6, 2014

Boston, MA 10/06/2014 (wallstreetpr) –  JPMorgan Chase & Co. (NYSE:JPM) seems to be going aggressively to grab the buy-out loan financing option to Vista Equity Partners for the purchase of Tibco Software Inc. (NASDAQ:TIBX). In the process, there could be risk invitation to the regulatory guidelines. Significantly, the move comes in the wake of another bank, Credit Suisse, drawing flak from the U.S. Federal Reserve for not adhering to the leveraged lending norms.

Excess Leverage

JPMorgan said to have aligned with unregulated lenders to guarantee a highly leveraged buyout financing option that might have over eight times’ of leverage including bonds and loans, Reuters reported. The Central Bank, the Office of the Comptroller, and the Federal Deposit Insurance Corp norms provide for six times leverage. These regulators came up with revised norms last year with a view to restraining financial institutions from indulging in irresponsible guaranteeing of loan.

Though the overall debt size was not disclosed, the bank has aligned with Jefferies, which is not regulated, to provide Vista Equity Partners with a financial underwriting of $4.3 billion. The surprise element was that JPMorgan Chase & Co. (NYSE:JPM) has been considered a conservative and its aggressiveness to grab the loan portfolio surprised analysts. Other banks like Deutsche Bank and Bank of America Merrill Lynch also given their commitment to lending Vista.

Brave Attempt

It was a turn of twists. Initially, JPMorgan Chase & Co. (NYSE:JPM) backed the rival suitor for Tibco Software Inc. (NASDAQ:TIBX). However, the bank seemed to have changed its tactics at the last minute to back Vista with a more aggressive package. Report said that Vista could not ignore the package since other banks would not be able to come up with a similar package.

Reuters report quoted a source as saying that financing also came from direct lending through alternative capital providers. This meant that the gap left by the banks could be filled by other capital providers.

Though JPMorgan Chase & Co. (NYSE:JPM)’s commitment could have the potential to be termed as non-compliant, there were numerous deals of more than six times leverage in the past. Still such deals were termed as satisfactory citing the bank’s annual examination of loan called as Shared National Credit reviews.

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Chris Brown

About Me: I have a Phd in Economics Gender: Male Interests: Playing games like cricket, volleyball Favorite Music: hip hop, rock, jazz

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