Omnicare $2.9 billion credit facility launch expected late July, early August

By Sara Rosenberg

New York, July 14 - Omnicare Inc. is expected to launch its $2.9 billion credit facility during the last week of July or the first week of August, although nothing is definitive at this point, according to a market source.

JPMorgan, Lehman Brothers and SunTrust Capital Markets are joint lead arrangers and joint bookrunners on the deal. JPMorgan and Lehman Brothers are co-syndication agents, SunTrust is administrative agent and CIBC World Markets, Merrill Lynch and Wachovia Securities are co-documentation agents.

The facility, as committed, consists of a $700 million five-year term loan, an $800 million five-year revolver and a $1.4 billion 364-day loan facility with an interest rate of Libor plus 75 basis points, according to a commitment letter.

Pricing on the term loan and the revolver will be based on ratings. If ratings are BBB+/Baa1 or better, the spread is Libor plus 50 bps.

If ratings are Baa2 or BBB, the spread is Libor plus 62.5 bps. If ratings are Baa3 or BBB-, the spread is Libor plus 75 bps. If ratings are Ba1 or BB+, the spread is Libor plus 100 bps. If ratings are Ba2 or BB, the spread is Libor plus 125 bps. And, if ratings are below Ba2 or BB, the spread is Libor plus 175 bps.

The commitment fee on the revolver and 364-day facility are also based on ratings and can range anywhere from 12.5 to 37.5 bps.

Financial covenants will include minimum fixed-charge coverage and minimum consolidated net worth.

Proceeds from the credit facility will be used to finance the acquisition of NeighborCare Inc., refinance existing debt and pay related fees.

More specifically, the company needs $1.5858 billion for the acquisition of all the outstanding common stock of NeighborCare, $254 million for the refinancing of NeighborCare's debt, including $250 million for the 6 7/8% senior subordinated notes due 2013 and $4 million for NeighborCare's outstanding revolver debt, $129.2 million for the refinancing of Omnicare's existing term loan debt, about $170 million for the refinancing of the Omnicare's existing revolver debt, $28.2 million for the estimated premium payable in connection with the tender for the 6 7/8% notes and $54.8 million for the estimated fees and expenses.

The 364-day loan facility is available in three ways: if the merger is not completed on the loan closing date, it will be available in up to two drawings, one on the closing date and one on the date of completion of the merger; if the merger is completed on the loan closing date, in a single drawing on that date; and the date on which payment is due for the tender or redemption of the 6 7/8% notes.

The company also has the option to get an additional $500 million 364-day loan facility after closing on this new deal. Proceeds from the incremental debt can be used for strategic acquisitions.

The merger, which has already cleared the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, is expected to close during the third quarter.

Omnicare is a Covington, Ky.-based provider of pharmaceutical care for the elderly. NeighborCare is a Baltimore, Md.-based institutional pharmacy provider serving long term care and skilled nursing facilities, specialty hospitals, assisted and independent living communities and other assorted group settings.

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