Alcon lines up $4.2 billion bridge, term, revolving loans for spinoff

By Wendy Van Sickle

Columbus, Ohio, March 22 – Alcon Inc. plans to enter into $4.2 billion in unsecured debt facilities ahead of its spinoff from Novartis AG, according to a 20FR12B/A filing with the Securities and Exchange Commission.

Specifically, the company expects to enter into a $1.5 billion 364-day bridge loan facility with two 180-day extension options; a $500 million three-year term loan facility A; an $800 million five-year term loan facility B; a $400 million, or euro-equivalent, five-year term loan facility C; and a $1 billion five-year committed multicurrency revolving credit facility.

Alcon expects to guarantee each of the facilities and that the revolver will have a mechanism for some of its subsidiaries to accede as borrowers.

Prior to the spinoff, which is expected to occur on April 9, Alcon plans to pay Novartis about $3 billion of the net proceeds of the bridge and term loan facilities in a transaction that would include settling intra company debt.

Any remaining net proceeds of would be used for general corporate and working capital purposes.

Alcon does not expect to draw on the revolver on the date of the spinoff.

The company said it plans to refinance the bridge facility with longer term debt in the short to medium term.

The newly formed company will have an investment grade credit rating, and the new credit facilities are anticipated to bear interest at Libor or Euribor plus a margin for a weighted average annual interest rate of 3.2% based on current market conditions.

The credit facilities are not expected to have any financial covenants.

The company expects to be permitted to voluntarily prepay loans under the facilities, in whole or in part, without penalty or premium subject to some minimum prepayment amounts, accrued interest on the amount prepaid and customary breakage costs.

The bridge facility will have a mandatory prepayment provision, applicable to proceeds from relevant debt capital markets transactions.

“In connection with the separation, we expect that $3.2 billion of borrowings will be outstanding under the facilities immediately after the spin-off,” Alcon said in the filing.

“Such indebtedness will require us to dedicate a portion of our future cash flows to payments on our debt, reducing our ability to use our cash flows to pay dividends, fund capital expenditures, BD&L or other strategic transactions, working capital and other general operational requirements.”

Some conditions must be met before the facilities become available for borrowing.

The company is also planning about $300 million of borrowings under a number of local bilateral facilities in various countries, with the largest share of borrowings in Japan, according to the filing.

Alcon will contain Novartis’ eye care devices business comprising its surgical and vision care businesses. Its headquarters are in Fort Worth.

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