Goldman Sachs Group Inc. (NYSE:GS) and Morgan Stanley (NYSE:MS) are reportedly preparing to arrange more than $6.5 billion (6 billion euros) in debt financing for potential buyers interested in acquiring Sanofi SA's (NASDAQ:SNY) consumer health division.

This move highlights banks' strong interest in supporting leveraged buyouts through pre-arranged financing.

The financing effort, spearheaded by Goldman Sachs and Morgan Stanley, forms part of Sanofi's strategy to divest its $20 billion consumer health business.

Advisers, including Bank of America Corp. (NYSE:BAC) and BNP Paribas SA are also involved in the financing, Bloomberg noted citing the sources familiar with the matter.

Also Read: Sanofi Nears Decision on $1.6B Upgrade For Frankfurt Insulin Plant.

A notable component of the financing package is a payment-in-kind (PIK) loan, anticipated to exceed 1.5 billion euros.

PIK loans, known for their borrower-friendly terms, alleviate immediate interest pressures but inflate overall debt burdens.

Typically, banks shy away from underwriting PIK debt due to its risk profile, often prompting buyers to seek PIK financing from direct lenders instead.

Sanofi's decision to explore divestment options, including a potential sale, comes amid a robust market for financing risky transactions.

The uncertainty stemming from the recent French legislative elections has introduced cautious optimism among potential bidders, who must navigate substantial equity commitments within the evolving political landscapes.

Despite these challenges, first-round bids for Sanofi's consumer health unit are expected imminently.

The Bloomberg report adds the resurgence of traditional lenders in funding high-risk transactions underscores growing investor confidence in stabilized interest rates.

Banks are now more willing to underwrite substantial acquisitions, selling off debt through syndicated loans, perceived as more affordable than private credit alternatives.

Should banks secure financing for Sanofi's consumer health division, prospective buyers will likely explore funding avenues in both euros and dollars, leveraging high-yield bonds and syndicated loans to optimize capital structures.

Price Action: SNY shares were trading higher by 0.25% to $51.34 at the last check on Friday.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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