Kinetic Concepts sets Oct. 7 deadline for $2.15 billion bridge loan commitments

By Paul A. Harris

Portland, Ore., Sept. 22 - During a Thursday conference call a timeline surfaced for the syndication of $2.15 billion of bridge loans backing the leveraged buyout of Kinetic Concepts Inc. and for planned subsequent debt offerings, according to a buyside source familiar with the matter.

The dealers, led by Morgan Stanley & Co. LLC, set an Oct. 7 deadline for investors to commit to participating in a $1.25 billion second-lien bridge and a $900 million unsecured bridge.

The Thursday call also set forth the timeline for a bond deal to take out the bridges.

According to that timeline, a roadshow would begin on Oct. 11, with pricing expected on Oct. 25. The bonds would settle on Nov. 4.

As a follow-up to the Thursday conference call, the dealers will hold one-on-one calls with accounts during the run-up to the Oct. 7 bridge commitment deadline.

Those calls will focus on price, according to the buysider, who declined to furnish any numbers.

Price was discussed during the Thursday call, the buysider said, but added that there is still wood left to chop, with respect to pricing, in order for the dealers to succeed in syndicating the bridge loans.

One reason for this is the very real possibility, given present market volatility, that participants may actually have to fund the bridge loan.

Under that scenario, ongoing market volatility would forestall the launch of the bond deal for an unspecified period of time. During that unspecified time interval, bridge participants, among them high-yield accounts angling for favorable bond allocations at the end of the road, would be saddled with the illiquid bridge loans in place of the bonds they desire.

Given those circumstances, accounts invited to participate in the bridge feel that they can command a premium for playing the loans, the buysider explained.

In addition to Morgan Stanley, Bank of America Merrill Lynch and Credit Suisse Securities (USA) LLC are involved in the Kinetic Concepts second-lien and unsecured debt transactions, which are 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.

Along with the $2.15 billion of 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. Previous to the intensified market volatility seen in recent weeks, 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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