Kinetic Concepts sets April 17 launch for $1.9 billion credit facility

By Sara Rosenberg

New York, April 10 - Kinetic Concepts Inc. has scheduled a bank meeting for April 17 to launch its proposed $1.9 billion senior secured credit facility, according to market sources.

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 $300 five-year million revolver, a $1 billion five-year term loan A and a $600 million six-year term loan B.

As was previously reported, pricing on the revolver and the term loan A are expected at Libor plus 325 basis points, and pricing on the term loan B is expected at Libor plus 350 bps, according to a commitment letter that was filed with the Securities and Exchange Commission on Monday.

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, the commitment letter said. 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, the commitment letter added. 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.

Proceeds will be used to help fund the acquisition of LifeCell Corp. 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.

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.

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

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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