Hill-Rom Holdings closes $1 billion term loan A, $500 million revolver

By Marisa Wong

Morgantown, W.Va., Sept. 8 – Hill-Rom Holdings, Inc. entered into a new senior credit agreement in connection with its acquisition of Welch Allyn Holdings, Inc., according to an 8-K filing with the Securities and Exchange Commission.

The company entered into a $1 billion five-year term loan A facility and a $500 million five-year senior secured revolving credit facility with JPMorgan Chase Bank, NA as administrative agent. The company also entered into an $800 million seven-year term loan B facility with Goldman Sachs Bank USA as administrative agent, as previously disclosed.

Goldman Sachs Bank USA, J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Inc., Citizens Bank, NA and PNC Capital Markets LLC are joint bookrunners and lead arrangers. Citizens Bank, Bank of America, NA and PNC Bank, NA are co-syndication agents. Citibank, Wells Fargo Bank, NA and Fifth Third Bank are co-documentation agents.

The term loans were used, in part, to fund the merger. No amounts were drawn on the revolver in connection with the acquisition.

Borrowings under the term loan A and revolver bear interest at Libor plus 150 basis points to 200 bps, depending on the company’s first-lien net leverage ratio. The initial rate for the term loan A and revolver is Libor plus 200 bps.

The term loan B is initially priced at Libor plus 275 bps.

The credit agreement requires the company to prepay outstanding term loans using cash proceeds from asset sales, excess cash flow and cash proceeds from debt issuances.

For the term loan A, the company is required to make scheduled quarterly payments as follows, with the balance due on the fifth anniversary of the closing date: 5% per year for year one, stepping up to 7.5% per year for year two, up to 10% per year for years three and four and down to 7.5% per year for the last year.

The facilities require the company to comply with two financial covenants, a total secured debt net leverage ratio test and a minimum interest coverage ratio.

On Tuesday, concurrently with its entry into the new credit agreement, the company terminated its amended and restated credit agreement dated May 1 and repaid all outstanding borrowings in full.

Hill-Rom is a Chicago-based medical technology company. Welch Allyn is a Skaneateles Falls, N.Y.-based manufacturer of medical diagnostic equipment.

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