Zimmer details bridge loan, revolver, term loan for Biomet buyout

By Marisa Wong

Madison, Wis., June 4 - Zimmer Holdings, Inc. entered into a 364-day bridge credit agreement and a multicurrency revolving and term loan credit agreement on May 29, according to an 8-K filing with the Securities and Exchange Commission.

Zimmer announced in April that it entered into a financing commitment letter with Credit Suisse AG and Credit Suisse Securities (USA) LLC for a 364-day bridge term loan facility in an amount of up to $7.66 billion and senior unsecured bank credit facilities totaling up to $4.35 billion.

The company will use the $7.66 billion bridge loan to finance its acquisition of Biomet, Inc. and intends to reduce the amount of the bridge loan with the issue of permanent financing prior to the closing of the merger.

Credit Suisse Securities (USA) LLC is the sole lead arranger and sole bookrunner, J.P. Morgan Securities LLC is the co-arranger and syndication agent, and Credit Suisse AG, Cayman Islands Branch is the administrative agent under the bridge credit agreement.

The bridge credit agreement requires the company to reduce unused commitments and prepay the loans with 100% of the net cash proceeds received from specified asset sales, issuances or sales of equity and incurrences of borrowed money indebtedness.

Commitments automatically terminate on the earliest of the funding and disbursement of the loans, the outside date as defined in the merger agreement or termination of the merger.

Proceeds of the bridge loan may only be used for the Biomet acquisition.

Loans will bear interest at Libor plus an applicable margin based on the company's senior unsecured long-term credit rating. The applicable margin ranges from 125 basis points to 175 bps.

The company will pay duration fees of 50 bps 90 days after the funding date, 75 bps on the 180th day and 100 bps on the 270th day.

In addition, the company will pay a 17.5 bps ticking fee on the daily actual unused commitment of each lender for the period from and including July 23 through the day the commitments under the bridge loan terminate. If the company does not have an investment-grade rating, the ticking fee will be 25 bps.

The bridge credit agreement also requires that the company maintain a consolidated indebtedness to consolidated EBITDA ratio of no greater than 5.0 to 1.0. If the company falls below an investment-grade credit rating, additional restrictions would result, including restrictions on investments and payment of dividends.

Multicurrency revolver

The credit agreement consists of a five-year unsecured term loan facility totaling $3 billion and a five-year unsecured multicurrency revolving facility for Zimmer and some of its subsidiaries in the amount of $1.35 billion.

Zimmer KK and Zimmer Investment Luxembourg Sarl are the borrowing subsidiaries.

Credit Suisse Securities and JPMorgan are joint lead arrangers and joint bookrunners; Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith Inc., BNP Paribas, HSBC Bank USA, NA, RBC Capital Markets and Bank of Tokyo-Mitsubishi UFJ, Ltd. are joint lead arrangers and co-documentation agents; and Credit Suisse Securities is syndication agent. JPMorgan Chase Bank, NA is the general administrative agent, JPMorgan Chase Bank, NA, Tokyo Branch is the Japanese administrative agent, and J.P. Morgan Europe Ltd. is the European administrative agent.

The multicurrency revolver replaces the company's existing credit agreement dated May 9, 2012 that provided for a $1.35 billion revolving credit facility due May 9, 2017 with two one-year extensions available.

The new revolver will mature on May 29, 2019 with two available one-year extensions.

Borrowings under the revolver will be used for general corporate purposes.

Term loan

Availability of the term loan is conditioned on, among other things, completion of the Biomet acquisition.

Borrowings under the term loan will mature five years after the term loan funding date and may only be used to fund the Biomet deal.

The credit agreement requires the company to reduce unused commitments under the term loan and prepay loans with 100% of the cash proceeds received from specified asset sales, issuances or sales of equity and incurrences of borrowed money indebtedness. Term loan commitments automatically terminate on the earliest of the funding and disbursement of the loans, the outside date under the merger agreement or termination of the merger.

Pricing

Borrowings will bear interest at floating rates based on indexes determined by the currency of the borrowing plus an applicable margin based on the company's senior unsecured long-term credit rating or, in the case of borrowings under the revolver only, at a fixed rate determined through a competitive bid process.

The applicable margin for revolving loans ranges from 68 bps to 150 bps, and the applicable margin for term loans ranges from 75 bps to 175 bps.

The company will pay a facility fee on the aggregate amount of the revolver at a rate based on the company's rating. The facility fee ranges from 7 bps to 25 bps.

The company will pay a ticking fee on the daily actual unused commitment of each lender under the term loan for the period from and including July 23 through the day the commitments under the term facility terminate. The ticking fee is 17.5 bps unless the company does not have an investment-grade rating, in which case the fee is 25 bps.

In addition, the credit agreement also requires that the company maintain a consolidated indebtedness to consolidated EBITDA ratio of (a) for periods prior to the term loan funding date, no greater than 3.0 to 1.0 and (b) for periods after the term loan funding date, no greater than 5.0 to 1.0. If the Company falls below an investment-grade credit rating, additional restrictions would result, including restrictions on investments and payment of dividends.

The Biomet deal is expected to close in the first quarter of 2015, as previously announced.

Zimmer develops and markets reconstructive and spinal implants, trauma and related orthopedic surgical products. Biomet and its subsidiaries design, manufacture and market surgical and non-surgical products. Both companies are based in Warsaw, Ind.

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