Kinetic Concepts allocates upsized $2.3 billion term loan package

By Paul A. Harris

Portland, Ore., Oct. 20 - Kinetic Concepts Inc.'s upsized $2.3 billion package of term loans allocated on Thursday, according to market sources.

A $1.63 billion Libor plus 575 basis points 6.5-year term loan B priced at 96.5, richer than price talk, which had been set at 95.5 to 96. The tranche features a 1.25% Libor floor and 101 soft call protection for one year.

The dollar-denominated loan broke to 99 1/8 bid, 99 7/8 offered, according to a syndicate source.

A €250 million Euribor plus 575 bps tranche, with the same Libor floor and call protection, priced at 95.5.

A $325 million Libor plus 525 bps five-year term loan C priced at 97. It had been talked to price 75 bps inside of the dollar-denominated term loan B, at an original issue discount of 95.5 to 96. The term loan C also features a 1.25% Libor floor and 101 soft call protection for the first year.

The less liquid C tranche broke to 98 bid, 98¾ offered.

The company's $2.4 billion senior secured credit facility (Ba3/BB-) also includes a $200 million five-year revolver.

Bank of America Merrill Lynch, Morgan Stanley & Co. Inc., Credit Suisse Securities (USA) LLC and RBC Capital Markets LLC are the lead arrangers and bookrunners on the deal, and UBS Securities LLC is a co-manager.

The entire $2.3 billion equivalent loan package came upsized from $2.2 billion. Of the upsize amount, $50 million will be used to reduce the Kinetic Concepts senior unsecured bridge loan to $850 million from $900 million; dealers elected not to launch into the market the bonds intended to take out that bridge. The remaining $50 million from the loan upsizing will be used to offset the original issue discounts.

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.

Other funds for the acquisition are expected to come from $1.65 billion of notes and about $1.75 billion of equity.

Total leverage is 6.0 times last-12-months EBITDA, and leverage through the first lien is 2.9 times.

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

A special meeting for shareholders has been set for Oct. 28.

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

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