Salix Pharmaceuticals to launch $1.35 billion facility on Dec. 3

By Sara Rosenberg

New York, Nov. 26 - Salix Pharmaceuticals Ltd. has set a bank meeting for 1:30 p.m. ET on Dec. 3 to launch its proposed $1.35 billion senior secured credit facility, according to a market source.

Jefferies Finance LLC, Fifth Third Securities Inc., PNC Capital Markets LLC, SunTrust Robinson Humphrey Inc. and SMBC are the lead banks on the deal. Natixis and RBS Citizens are senior managing agents.

The facility consists of a $150 million five-year revolver and a $1.2 billion six-year covenant-light term loan.

Official talk is not yet available.

Filings with the Securities and Exchange Commission have said that the revolver is expected at Libor plus 300 basis points with a 50 bps unused fee and a 1% Libor floor, and the term loan is expected at Libor plus 375 bps with a 1% Libor floor, 101 soft call protection for six months and amortization of 1% per annum.

Proceeds will be used to help fund the acquisition of Santarus, Inc. for $32 per share, or about $2.6 billion.

Other funds for the transaction are expected to come from $750 million of senior notes and about $800 million of cash on hand.

Backing the bonds is a commitment for a $750 million one-year bridge loan that is priced at Libor plus 525 bps with a 1% Libor floor. The spread will increased by 50 bps every 90 days until it reaches a cap.

Closing is expected in the first quarter of 2014, subject to a minimum tender of at least a majority of the outstanding shares of Santarus common stock on a fully diluted basis, the expiration or termination of the waiting period under the Hart Scott Rodino Antitrust Improvements Act and other customary conditions.

Annualized combined company financial results based on the quarter ended Sept. 30 were revenue of around $1.35 billion and adjusted EBITDA of $537 million.

The company expects that strong cash flow generation should allow delevering to a debt/EBITDA target of about 3 times over the next three years.

Salix is a Raleigh, N.C.-based developer and marketer of prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases. Santarus is a San Diego-based specialty biopharmaceutical company.

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