Kinetic Concepts starts upsized $2.55 billion three-part notes offer

By Paul A. Harris

Portland, Ore., Oct. 7 - Kinetic Concepts Inc. will begin marketing its upsized $2.55 billion three-part offering of high-yield notes on a European roadshow scheduled for the Oct. 10 week, according to an informed source.

A roadshow in the United States will follow during the week of Oct. 17.

The LBO financing deal includes an upsized $1.65 billion equivalent tranche of eight-year second-lien senior secured notes, which will be offered in dollar and euro denominations. The tranche was upsized from $1.25 billion.

The deal also includes a dollar-only $900 million tranche of eight-year senior unsecured notes.

The second-lien notes come with three years of call protection, while the unsecured notes feature four years of call protection.

Morgan Stanley & Co. LLC, Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC and RBC Capital Markets are the joint bookrunners. UBS Investment Bank is the co-manager.

The Rule 144A and Regulation S with registration rights notes are to be issued by Chiron Merger Sub, Inc., which will be merged with and into Kinetic Concepts.

Credit ratings remain to be determined.

Proceeds will be used to help fund the buyout of the company by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board for $68.50 per share in cash in a transaction valued at $6.3 billion, including outstanding debt.

The overall high-yield notes amount was upsized from $2.15 billion when the company downsized its term loan by an identical $400 million amount, reducing the loan to $2.2 billion from $2.6 billion.

In addition to the bonds and the term loan, acquisition financing includes a $200 million revolver and about $1.75 billion of equity.

Closing is expected in the second half of this year, subject to certain conditions, including shareholder and regulatory approvals. It is not subject to financing.

A special meeting for shareholders to approve the transaction is set for Oct. 28.

Kinetic Concepts is a San Antonio-based medical technology company.

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