Hub revised LBO financing to include $825 million credit facility, $700 million bonds

By Sara Rosenberg

New York, April 23 - Hub International Ltd. modified its financing plans to help back its buyout by Apax Partners and Morgan Stanley Principal Investments to include an $825 million senior secured credit facility and $700 million of high-yield bonds, according to PRER14A filed with the Securities and Exchange Commission Monday.

Under the original plans, the debt financing was expected to be comprised of a $795 million senior secured credit facility and $590 million of high-yield bonds.

The revised credit facility consists of a $100 million six-year revolver, a $100 million seven-year delayed-draw term loan and a $625 million seven-year term loan, the filing said.

By comparison, the original debt commitment called for a $595 million term loan, a $100 million delayed-draw term loan and a $100 million revolver, with all tranches expected to carry an interest rate of Libor plus 250 basis points.

A portion of the term loan may be denominated in Canadian dollars.

Meanwhile, the revised bond deal will be comprised of a $350 million senior unsecured notes offering and a $350 million senior subordinated notes offering.

By comparison, the original plans called for a $340 million senior unsecured notes tranche and a $250 million of senior subordinated notes tranche.

As a backup for the bonds, the company has received a modified commitment for a $350 million senior unsecured increasing rate bridge loan and a $350 million senior subordinated increasing rate bridge loan.

Morgan Stanley and Merrill Lynch are joint bookrunners and joint lead arrangers on the credit facility, with Morgan Stanley the administrative agent and Merrill Lynch the syndication agent.

Morgan Stanley and Merrill Lynch also provided the bridge loan commitment.

In addition to funding the buyout, proceeds from the financing will be used to refinance certain existing indebtedness, including $75 million of 6.43% senior notes due April 4, 2016, $7.5 million of 5.71% senior notes due April 4, 2011 and $55 million of 6.16% senior notes due June 15, 2013.

The delayed-draw term loan will be available to, among other things, finance permitted acquisitions and for general corporate purposes.

Under the terms of the transaction, Hub shareholders will receive $41.50 per share in cash, raised from an original transaction price of $40.00 per share in cash due to the receipt of competing proposals.

Other LBO financing will come from $724 million of equity, including rollover commitments.

The transaction is expected to be completed toward the end of the second quarter, subject to shareholder approval, Canadian court approval, other regulatory approvals and customary closing conditions. There is no financing condition.

Hub is a Chicago-based insurance broker.

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