HCP closes $1 billion mezzanine loan to help finance Manor Care buyout by Carlyle

By Jennifer Chiou

New York, Dec. 21 - HCP, Inc. announced the closing of a $1 billion mezzanine loan, a portion of which will finance the Carlyle Group's $6.3 billion purchase of Manor Care, Inc.

The loan bears interest at Libor plus 400 basis points and matures in January 2013. It was purchased at a discount for about $900 million.

The company said that the loan is secured by an indirect pledge of the equity ownership in 339 facilities located in 30 states, is pre-payable at any time subject to yield maintenance during the first 12 months and is mandatorily pre-payable in January 2012, unless the borrower satisfies certain financial conditions.

On Oct. 18, Manor Care launched its $900 million senior secured credit facility, comprised of a $700 million seven-year term loan B and a $200 million six-year revolver, the proceeds of which will be used to help fund the buyout of the company by Carlyle for $67.00 in cash per share.

Carlyle Group has invested $1.3 billion of equity in the overall transaction.

"HCR ManorCare's portfolio is performing at industry-leading levels of quality mix and occupancy," said Jay Flaherty, HCP's chairman and chief executive officer, in a news release.

"We are excited with our investment and the opportunity to partner with chief executive officer Paul Ormond, his proven management team and The Carlyle Group."

As already reported, other LBO financing came from $1.327 billion in equity and $4.6 billion in CMBS debt that is priced at Libor plus 250 bps.

Manor Care is a Toledo, Ohio, provider of short-term post-acute services and long-term care. Based in Long Beach, Calif., HCP is a self-administered real estate investment trust.

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