By Paul A. Harris
Portland, Ore., Oct. 25 - Kinetic Concepts, Inc. priced an upsized and restructured $1.75 billion issue of 10½% seven-year second-lien senior secured notes (B3/B/) at 98.198 to yield 10 7/8% on Tuesday, according to an informed source.
The issue was upsized from $1.65 billion.
The yield printed in the middle of the 10¾% to 11% yield talk.
The maturity of the notes was decreased to seven years from 7.5 years.
Call protection was increased to four years from three years.
A planned euro-denominated tranche was withdrawn.
Morgan Stanley & Co. LLC, Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC and RBC Capital Markets were the joint bookrunners.
UBS Securities LLC and SunTrust Robinson Humphrey, Inc. were the co-managers.
The second-lien notes tranche was previously upsized to $1.65 billion from $1.25 billion with the shifting of $400 million from the bank loan.
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.
In addition to the bonds and the $2.3 billion term loan, acquisition financing includes a $200 million revolver and about $1.75 billion of equity.
The financing also included a $900 million unsecured bridge loan. The dealers planned to take out that bridge with the issuance of $900 million senior unsecured notes. However they declined to launch the unsecured tranche into the market due to market conditions at the time they launched the second-lien notes.
The additional amount of proceeds from Tuesday's upsizing of the second-lien notes will be used to reduce the size of the unsecured bridge, which was previously reduced by $50 million with an upsizing of the bank loan last week.
The dealers are holding the remainder of the bridge, approximately $750 million, and plan to take it out with a bond deal, which they will launch into the market as circumstances permit, an informed source said on Tuesday.
Kinetic Concepts is a San Antonio-based medical technology company.
| Issuer: | Chiron Merger Sub, Inc. prior to the merger, then Kinetic Concepts, Inc. and KCI USA, Inc.
|
| Face amount: | $1.75 billion, increased from $1.65 billion
|
| Proceeds: | $1.718 billion
|
| Maturity: | Nov. 1, 2018
|
| Securities: | Second-lien senior secured notes
|
| Bookrunners: | Morgan Stanley & Co. LLC, Bank of America Merrill Lynch, Credit Suisse Securities (USA) LLC, RBC Capital Markets, LLC
|
| Co-managers: | UBS Securities LLC, SunTrust Robinson Humphrey, Inc.
|
| Coupon: | 10½%
|
| Price: | 98.198
|
| Yield: | 10 7/8%
|
| Spread: | 929.5 bps
|
| Call features: | Make-whole call at Treasuries plus 50 bps until Nov. 1, 2015, then callable at 105.25, 102.625, par on and after Nov. 1, 2017
|
| Equity clawback: | 35% at 110.5 until Nov. 1, 2014
|
| Trade date: | Oct. 25
|
| Settlement date: | Nov. 4
|
| Ratings: | Moody's: B3
|
| Standard & Poor's: B
|
| Distribution: | Rule 144A and Regulation S with registration rights
|
| Price talk: | 10¾% to 11%
|
| Marketing: | Roadshow
|
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