The business with an interest bill of £2.2m per day
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It must be interesting to work as the Finance Director of Alliance Boots. Very occasionally (i.e. once) you find yourself paying a £1.5bn dividend to the new business owners. However, more often you are writing out a cheque for interest to the banks whose debt financed the merger of Alliance and Boots back in July 2008. The daily interest charge is currently just over £2m according to this article in the Times.
The financial engineering that accompanies substantial mergers like this is pretty complex. However, the simple problem for Alliance Boots is this. The merger was financed by £9 billion of debt at quit a high rate of interest. Only £0.25bn of this debt has been syndicated (i.e. passed onto) other banks. Syndicated debt would be expected to be at a lower rate of interest. So Alliance Boots is left with a substantial amount of debt at a high interest rate - cutting into profits.
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