(Bloomberg) -- A multitude of obstacles stand in the way of Getty Images Holdings Inc. and its need for just over $1 billion of funds. 

It’s in the middle of a deal to acquire a rival, which means it can’t give an accurate read of its financials to prospective bond investors. It’s running down its debt facilities and faces a ratings downgrade further into junk unless it can replace them this month. And its business of visual content is under threat from artificial intelligence. 

Bankers at JPMorgan Chase & Co. came up with an unorthodox solution: selling loans to clients who normally buy junk bonds, according to a person with knowledge of the deal who declined to be identified. 

JPMorgan started selling the loans this week, including a dollar portion that pays interest at a fixed rate, like most bonds, rather than a floating rate, typical for loans. It offers a yield of 11.25%-11.50% at par, versus a premium of about 3.5 percentage points above money-market rates for loans in the B+ ratings category. 

After Getty Images completes its merger with Shutterstock Inc. and comes up with new valuations, then investors can take part in a voluntary exchange to swap their loans into secured bonds, the person said. The proforma financials aren’t expected to be ready until early April.

A spokesperson for JPMorgan declined to comment, while a representative for Getty Images didn’t immediately respond to a request for comment.

Getty Images’ initial plan was to tap the high yield bond market earlier this year, but that was derailed by the deal with rival Shutterstock. The combined company will be worth about $3.7 billion, fusing Getty Images’ library of photos, illustrations and videos with Shutterstock’s searchable platform that lets contributors upload their content.

The company is under pressure to refinance its existing $579 million and €419 million ($437 million) leveraged loans due February 2026. Borrowers typically refinance at least 18 months, but no less than one year, before maturity. After that, facilities become current, meaning they have to be repaid within 12 months. That leaves companies at risk of a downgrade that could trigger forced selling.

If the merger isn’t approved by regulators, then the new loans can remain outstanding or can be converted to dollar bonds based on valuations for Getty Images as a standalone company. The company’s current senior debt leverage is 3.3 times and 4.3 times in total. 

Loan Features

The new financing is split into a $675 million fixed rate loan, non-callable for two years, and a euro-denominated tranche for the equivalent of $375 million. The euro loan will be marketed to collateralized loan managers with preliminary terms of 600 basis points over Euribor, and an original initial discount of 95. It’s non-callable for a year.

If the exchange offer to convert the dollar debt into bonds doesn’t materialize for any reason, the interest margin increases by 100 basis points. The company’s outstanding $300 million unsecured bonds due March 2027 will remain in place until they can be refinanced after the merger is finalized, the person said. 

Lenders to the new euro loan have been offered springing maturity if the unsecured bonds are not refinanced by December 2026.

Another unusual feature on the euro-denominated tranche is that it amortizes at 5% per annum. Amortization is one way the company can demonstrate to the lender base it is serious about a conservative financial policy to protect its business from the rapid encroachment of AI.

--With assistance from Amedeo Goria.

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