King Pharmaceuticals reworks deal, launches as $300 million term loan talked at Libor plus 500 bps

By Sara Rosenberg

New York, Nov. 20 - King Pharmaceuticals Inc. completely revised its proposed credit facility ahead of the Thursday afternoon bank meeting that was held to launch the deal, opting to only approach lenders with a $300 million four-year term loan, according to a market source.

The term loan is being talked at Libor plus 500 basis points with an original issue discount of 96.

Amortization on the term loan is 15% in year one, 20% in years two and three, and 45% in year four.

Previously, the company was planning on getting a $1 billion senior secured credit facility (Ba2/BBB-) consisting of a $150 million revolver talked at Libor plus 500 bps, a $350 million term loan A talked at Libor plus 500 bps with an original issue discount of 96 and a $500 million term loan B talked at Libor plus 550 bps with an original issue discount of 95.

Credit Suisse and Wachovia are the joint lead arrangers and bookrunners on the deal, with Credit Suisse the administrative agent.

Proceeds from the term loan will be used to help fund the company's hostile takeover attempt of Alpharma Inc. through a tender offer of $37 per share for all of Alpharma's outstanding shares of class A common stock. The $1.6 billion offer was taken directly to Alpharma shareholders.

In addition, the company is now hoping to amend its existing $475 million revolver to allow for the new term loan and leave it in place following the close of the transaction.

Under the revolver amendment, pricing would increase to Libor plus 500 bps from Libor plus 87.5 bps, the commitment fee would increase to 50 bps from 20 bps and lenders would be paid a 100 bps amendment fee.

The plan is to draw $425 million under the amended revolver to help fund the acquisition.

The rest of the funds for the acquisition that were lost through the downsizing of the amount of term loan debt being obtained will be made up for through the use of more cash by the companies.

Leverage is 1.0 times through the credit facility.

The tender offer for Alpharma's stock expires on Nov. 21, after being extended from an original Oct. 10 deadline. As of Oct. 10, about 18.8 million shares, or 45%, of the class A common stock of Alpharma were tendered.

King Pharmaceuticals is a Bristol, Tenn.-based integrated branded pharmaceutical company. Alpharma is a Bridgewater, N.J.-based specialty pharmaceutical and animal health company.

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