Salix cuts spread on $1.2 billion term loan B to Libor plus 325 bps

By Sara Rosenberg

New York, Dec. 5 - Salix Pharmaceuticals Ltd. reduced pricing on its $1.2 billion six-year covenant-light term loan B to Libor plus 325 basis points from talk of Libor plus 350 bps to 375 bps, according to a market source.

Also, a step-down was added to the term B to Libor plus 300 bps when leverage is less than 3.75 times, the source said.

As before, the B loan has a 1% Libor floor, an original issue discount of 991/2, 101 soft call protection for six months and amortization of 5% per annum.

The company's $1.35 billion senior secured credit facility (Ba1/BB) also includes a $150 million five-year revolver.

Commitments are due at 2 p.m. ET on Friday, accelerated from Dec. 13, the source added.

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.

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 increase 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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