Ryan Cohen’s mysterious bank letter backing his eBay bid reveals a big issue
GameStopMysterious financing letter backing bold $56 billion bid eBay It is emerging as a central issue in the proposed takeover, as questions mount about whether the deal is actually financeable.
The video game retailer said it has arranged a $20 billion financing commitment from TD Securities, part of TD Bank. But a key condition attached to that letter could ultimately make or break the deal: The combined company must maintain an investment-grade credit profile, CNBC’s David Faber reported, citing people who have seen the document.
Moody’s Ratings said Wednesday that the proposed acquisition would be “credit negative” for eBay due to the significant increase in leverage implied by the deal structure.
The rating agency estimated that the combined company’s leverage could approach nine times debt to earnings before interest, taxes, depreciation and amortization before accounting for any cost-saving synergies.
This level of borrowing would likely push the combined company below investment grade, potentially undermining a key condition tied to the TD financing package.
The proposed acquisition raised immediate questions about how GameStop could finance a deal of this size. The video game retailer’s market cap of about $11 billion is only a fraction of the transaction’s implied value.
CEO Ryan Cohen offered limited clarity on the structure, other than to say his company has the ability to issue additional shares to make the deal happen.
eBay confirmed this received the offer The board will review it, he said Monday.
The New York Times and Semaphore reported on the mysterious letter on Wednesday.
