NEW YORK (Reuters) - Private equity firm Blackstone (>> The Blackstone Group L.P.) is set to launch a $4.2 billion financing to back its $5.4 billion acquisition of auto parts maker Gates Global. The deal is the second-largest U.S. leveraged buyout financing of the year, according to Thomson Reuters data, and is also the largest private equity buyout of an industrial company in more than four years.

The loans are being provided by Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley and UBS.

The financing, which is second in size only to the $7.6 billion credit backing Cerberus Capital Management's acquisition of Safeway in early March, will be split between loans and bonds, people familiar with the matter said.

The facility is expected to be welcomed by bankers and investors who are hungry for large M&A financings to sink their teeth into after a dearth of large-sized deals this year.

"The market is really anxious to see more of these larger deals, and new-money deals come to the market," a loan banker said.

The third- and fourth-largest leveraged buyout financings of 2014, after Gates, are MultiPlan's $2.275 billion deal, led by Barclays and JP Morgan, and Johnson & Johnson Ortho-Clinical Diagnostics' $4.15 billion financing, led by Barclays and Goldman Sachs.

Although sizeable, buyout deals reaching the market this year are far smaller than some of the deals that launched in 2013, such as computer maker Dell's $9.122 billion take-private financing and $12 billion of loans backing food processing giant HJ Heinz's $12 billion buyout.

Leverage through Gates Global's bank debt is expected to be about five times. Leverage through the bonds is expected to be seven times, which suggests a split of 70 percent bank debt and 30 percent bonds. The bank debt will include a revolving credit, a term Loan B and a bridge loan, which is expected to be refinanced with high yield bonds. After months of negotiations, Blackstone agreed to purchase Denver-based Gates, which manufactures power transmission belts and fluid power products, from affiliates of Onex Corporation (>> ONEX Corporation) and Canada Pension Plan Investment Board for $5.4 billion on April 4 after its owners ruled out an IPO.

Blackstone will purchase all the equity interests of Pinafore Holdings, the parent company of Gates Corporation. The transaction is expected to close later this year and is subject to customary closing conditions and regulatory approvals.

Blackstone is expected to make an equity contribution of $1.6 billion, which is one of the biggest equity contributions in a private equity buyout in the last few years.

(Editing By Jon Methven)

By Michelle Sierra

Stocks treated in this article : The Blackstone Group L.P., ONEX Corporation