ConvaTec dips on Kinetic acquisition rumors; Emdeon provides more buyout financing details

By Sara Rosenberg

New York, Aug. 22 - ConvaTec Healthcare's term loan headed lower in trading on Monday after chatter surfaced that the company has made a buyout bid for Kinetic Concepts Inc. that might be considered a better offer than the one Kinetic already has in place.

In other news, Emdeon Inc. filed its credit facility commitment letter with the Securities and Exchange Commission, outlining expected pricing on the transaction.

ConvaTec softens

ConvaTec saw its term loan retreat in the secondary market on rumors that the company submitted a bid to purchase Kinetic Concepts that exceeds a current buyout offer, according to traders.

The term loan was quoted by one trader at 91 bid, 93 offered early in the morning, down from 92 bid, 94 offered on the open Monday, but then it bounced back to 92 bid, 94 offered by midday. The trader had the loan closing on Friday at 92½ bid, 94½ offered.

Meanwhile, a second trader was also seeing the term loan quoted at 92 bid, 94 offered on Monday afternoon, but he had the loan going out on Friday at 93 bid, 95 offered.

Kinetic Concepts term loan was unchanged on the chatter at 99 bid, 99¾ offered, being that guys expect it will be taken out regardless of who emerges as the winning buyer, the second trader added.

Fight for Kinetic?

In July, Kinetic Concepts, a San Antonio-based medical technology company, entered into an agreement to be acquired by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board.

With the agreement, the company had a go-shop period that expired at 11:59 p.m. ET on Sunday, during which it could solicit other buyout proposals.

Talk is that ConvaTec put in a higher bid for Kinetic Concepts before this go-shop period expired.

It is also rumored that ConvaTec, a Skillman, N.J.-based medical technologies company owned by Nordic Capital and Avista Capital Partners, would get new debt financing for the purchase that would be led by Goldman Sachs & Co. and Jefferies & Co., sources remarked.

Kinetic in SMA round

If Kinetic Concepts is bought by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, as originally planned, debt financing would also be used, with the expectation being that there would be a $2.8 billion senior secured credit facility (Ba3/BB-).

Kinetic Concepts' proposed credit facility for the Apax buyout already launched to senior managing agents earlier this month, and the retail launch is anticipated as post-Labor Day business, assuming the buyout takes place.

The facility consists of a $2.6 billion term loan and a $200 million revolver, with price talk not yet available.

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc. and Credit Suisse Securities (USA) LLC are the lead banks on the deal.

Kinetic plans notes

Other funds for Kinetic's acquisition by the Apax group of investors would come from $2.15 billion of bonds and $1.75 billion of equity.

The company has received a commitment for a $900 million senior unsecured bridge loan and a $1.25 billion senior secured second-lien bridge loan to back the proposed notes offering.

If the Apax deal moves forward, syndication of the bridge loans is expected to launch after Labor Day. It was expected to kick off earlier this month, but the filing of the company's proxy got delayed until Aug. 8, the day that the market fell hundreds of points. As a result, the decision was made to move the launch to September.

The Apax agreement calls for the purchase of the Kinetic Concepts for $68.50 per share in cash in a transaction valued at $6.3 billion, including outstanding debt. Closing is expected in the second half of this year, subject to certain conditions, including shareholder and regulatory approvals.

Emdeon expected spreads

Emdeon came out with expected pricing on its proposed $1.325 billion senior secured credit facility as the company filed the commitment letter with the Securities and Exchange Commission on Monday, although it was also mentioned that the deal does have flex provisions.

The letter said that the $125 million five-year revolver is expected at Libor plus 450 basis points with a 50 bps unused fee, and the $1.2 billion covenant-light seven-year term loan B is expected at Libor plus 475 bps with a 1.25% Libor floor. Both tranches would have at least one 25 bps step-down based on consolidated first-lien net leverage.

Also, it was disclosed that the term loan B can be increased to fund any original issue discount or up-front fees.

Bank of America Merrill Lynch, Citigroup Global Markets Inc. and Barclays Capital Inc. are the joint lead arrangers and bookrunners on the deal.

Emdeon being acquired

Proceeds from Emdeon's credit facility, along with $750 million of senior notes, $870 million of equity and the rollover of about $330 million of equity, will be used to fund the buyout of the company by Blackstone Capital Partners VI LP for $19 per share in cash. The transaction is valued at about $3 billion.

Backing the notes is a commitment for a $750 million one-year senior unsecured bridge loan priced at Libor plus 850 bps with a 1.25% Libor floor. After 60 days, interest will be at the senior cap.

Closing is expected in the second half of this year, subject to customary conditions, including approval by Emdeon's stockholders and clearance under the Hart-Scott-Rodino Act.

Following completion of the acquisition, Hellman & Friedman will maintain a significant minority equity interest in the company.

Emdeon is a Nashville-based provider of revenue and payment cycle management services, connecting payers, providers and patients in the U.S. health care system.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.