Kinetic Concepts plans $1.9 billion credit facility for LifeCell purchase

By Sara Rosenberg

New York, April 7 - Kinetic Concepts Inc. plans on getting a new $1.9 billion senior secured credit facility to help fund its acquisition of LifeCell Corp., according to an SC TO-C filed with the Securities and Exchange Commission Monday.

Bank of America and JPMorgan are the joint lead arrangers and joint bookrunners on the deal that is fully underwritten, with Bank of America the administrative agent and JPMorgan the syndication agent.

The facility consists of a five-year $300 million revolver expected at Libor plus 325 basis points, a $1 billion five-year term loan A expected at Libor plus 325 bps and a $600 million six-year term loan B expected at Libor plus 350 bps.

There is a 3.25% Libor floor for all tranches.

The revolver has a 50 bps commitment fee and any portion of the term loans that is delayed-draw will have a delayed-draw fee of half the spread.

An original issue discount in an amount equal to 1% of the amount of the commitments under the revolver will be effected in the form of an additional upfront fee equal to such amount, payable to the lenders under the revolver on the closing date.

The term loan A will be issued at an original issue discount of 99. At the option of the lead banks, this discount may instead be effected in the form of an additional upfront fee to the lenders.

The term loan B will be issued at an original issue discount of 95. At the option of the lead banks, this discount may also instead be effected in the form of an additional upfront fee to the lenders.

Amortization on the term loan A is 10% in years one and two, 20% in year three, 25% in year four and 35% in year five.

Amortization on the term loan B is 1% per year, with the final payment due at maturity.

Financial covenants include a maximum leverage ratio and a minimum fixed charge coverage ratio.

As part of permanent financing and subject to market conditions, Kinetic may access the equity-linked markets during 2008.

Pro forma leverage is expected to be around 2.9 times, company officials said in a conference call Monday.

The company expects to rapidly pay down debt. In fact, leverage is anticipated to be below 1.0 times in 2010, officials added in the call.

Under the purchase agreement, Kinetic will commence a cash tender offer to acquire all outstanding shares of LifeCell's common stock at a price of $51 per share. The transaction is valued at $1.7 billion in cash.

Based on existing operations, the combined companies are expected to generate revenue of about $2 billion in 2008.

The transaction is expected to close in the first half of 2008, subject to the tender of at least a majority of the fully diluted LifeCell shares, completion and funding financing, and the satisfaction of regulatory and other customary conditions.

Kinetic is a San Antonio-based medical technology company. LifeCell is a Branchburg, N.J.-based provider of biological products for soft tissue repair.

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