Pfizer Deal's $22.5B in Loans Hasn't Unlocked Credit

Think Pfizer’s $68 billion deal to buy Wyeth, financed in part with $22.5 billion in loans, means credit markets have thawed? Think again, the Wall Street Journal reports. Pfizer’s lenders—including JPMorgan, Bank of America, Goldman, and Citigroup—are charging high interest (7%-9%, with loans due in a year) and can walk if Pfizer’s credit rating drops below investment-grade.

Wyeth is also guaranteed a $4.5 billion break-up fee if Pfizer’s rating drops and the banks balk—about double the usual penalty for such transactions. “Introducing a ratings condition was not popular, but they took comfort in the high credit quality of Pfizer,” a source said of Wyeth. Standard & Poor’s placed Pfizer’s triple-A rating on downgrade watch on news of the deal, citing the added leverage. (More Pfizer stories.)