Kinetic Concepts sets Thursday call for $2.15 billion bridge loans

By Paul A. Harris

Portland, Ore., Sept. 21 - Dealers led by Morgan Stanley & Co. LLC plan to host an investor call at 2 p.m. ET on Thursday to discuss the syndication of bridge loans backing Kinetic Concepts Inc.'s $2.15 billion of second-lien and senior unsecured debt, according to a buyside source who is familiar with the matter.

On the table will be a $1.25 billion second-lien bridge and a $900 million unsecured bridge. While the unsecured portion is expected to be taken out by bonds, it remains to be determined whether the second-lien debt will surface in the form of a bond or a bank loan, the source said, adding that in either case the structure will more closely resemble that of a high-yield bond.

The debt is part of the financing for the buyout of the company by Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board.

Dealers face some urgency in syndicating the bridge because the acquisition closes in late October, the buysider said.

Under discussion will be bridge caps for both pieces of debt. The buysider declined to specify what the present bridge caps are but said that successful syndication of the bridges may hinge on the willingness of the dealers to march those caps significantly higher.

Given present market conditions there is a significant chance that bridge participants will actually be called upon to fund the bridges, the buysider said, but added that the Kinetic Concepts LBO deal has a lot going for it, so investors will give the bridge deal a fair hearing.

High-yield investors who have participated in bridge loans, most recently the bridge backing Sealed Air Corp.'s bonds, claim to have seen actual bond allocations in excess of what they would have expected had they not participated in the bridges.

In addition to Morgan Stanley, Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC are in the Kinetic Concepts deal.

In addition to the second-lien and unsecured debt, the Kinetic Concepts LBO also features a $2.8 billion senior secured credit facility (Ba3/BB-).

The facility, with Bank of America Merrill Lynch as the left lead, is expected to launch at a bank meeting in October. News on the October timing surfaced on Tuesday. Previously the bank deal had been expected as September business.

Apax Partners, Canada Pension Plan Investment Board and the Public Sector Pension Investment Board are acquiring Kinetic Concepts 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 $1.75 billion of equity.

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

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