Banks Ready $3.75B Debt Sale to Back BP Castrol Buyout

(Waldo Swiegers/Bloomberg)

Banks are preparing to sell $3.75 billion in debt to back Stonepeak Partners’ acquisition of a majority stake in BP Plc’s Castrol division, taking advantage of a hot credit market to offload risk long before the deal is expected to close.

Underwriters including BNP Paribas SA, Goldman Sachs Group Inc., UBS Group AG and Wells Fargo & Co. are planning to start selling the debt to institutional investors toward the end of the first quarter or the beginning of the second, according to people familiar with the matter. The debt package is expected to consist of leveraged loans and high yield bonds in euros and dollars, they added, asking not to be identified because the information is private.

Plans haven’t been finalized and could still change, the people said.

Stonepeak’s acquisition of Castrol isn’t due to close until later in 2026, but the lenders are keen to capitalize on the current opportunity window, with investors eager to put cash to work in new deals despite some of the tightest pricing in years, the people added.

Representatives for Stonepeak, BNP, Goldman, UBS and Wells Fargo declined to comment. BP didn’t respond to a request for comment.

Timing the Market

The timing of bringing a deal to market is a delicate balance. Borrowers don’t pay interest when the debt is on banks’ balance sheets before an acquisition closes. They typically start to pay when it is sold on to investors — even before the transaction is finalized. But when pricing in the market is tight — as it is now — delaying coming to market could mean borrowers end up paying more.

Banks have been vying for buyout financing deals, which provide some of the most lucrative fees in investment banking. M&A bounced back last year and some bankers are predicting a record year for dealmaking in 2026. Still, even as lenders are keen to offer good terms in order to win new deals, they’re also eager to offload the risk as soon as they can.

Wall Street is still shaken by the hung debt episode of a few years ago, when soaring inflation and interest rates left many of the biggest banks stuck with financing they had underwritten for deals but were unable to sell until much later, often at huge losses.

When the roughly $18 billion purchase of medical device maker Hologic Inc. was announced in October, bankers planned to swiftly offload the financing to investors in early 2026 before other deals hit the market or the macroeconomic backdrop shifted. The deal was launched for syndication to investors as soon as the market opened in January.

However, other recent deals have seen banks wait a long time to sell down debt. Deutsche Bank AG and Goldman Sachs were among lenders eager to sell roughly $1.2 billion of debt financing backing Apax Partners’ buyout of a unit of Finastra Group Holdings Ltd., which was underwritten in May 2025. They got the go-ahead to eventually sell it in January.

Intense Competition

For financings in the pipeline, including Castrol, banks are keen to tap into the current high demand, aware that there will be competition to capture investor liquidity for a number of jumbo financings, according to the people.

READ MORE: BP Urged to Prove Value of Its Renewed Focus on Oil

Top of that list is the highly anticipated $20 billion debt financing backing the acquisition of Electronic Arts Inc., the biggest leveraged buyout on record. JPMorgan Chase & Co. is among banks that have begun syndicating that debt, currently with a focus on selling to other banks. The timeline to sell to institutional investors is scheduled around April, but could happen as soon as March.

Banks are also preparing to sell about $7.9 billion in debt as soon as this month to finance Clayton Dubilier & Rice’s buyout of packaging firm Sealed Air Corp.

Those deals will follow an active start to 2026 for junk-rated acquisition debt sales that have been mostly well received. The $8.75 billion financing to fund the Hologic buyout showed that demand for risky debt is strong.

Unusual Structure

Unusually, Castrol’s debt will sit at a holding company level. By doing so, it prevents high leverage levels at the operating company level, where BP still owns a stake, the people said. The operating company is expected to be better rated than the holding company, they added.

The structure could prompt more carve-outs by companies, especially when they look to keep hold of minority stakes, the people said. 

The U.K. energy giant will raise about $6 billion from the sale of a 65% interest, which includes some prepayment of future dividends on its remaining stake.