By Paul A. Harris
Portland, Ore., April 8 – Organon & Co. priced $4.1 billion and €1.25 billion of high-yield notes in three upsized tranches on Thursday, according to market sources.
An upsized $2.1 billion tranche of seven-year senior secured notes (Ba2/BB) priced at par to yield 4 1/8%, tight to the 4 1/8% to 4¼% talk, and in line with initial talk in the low 4% area. The tranche size increased from $2 billion.
An upsized €1.25 billion tranche of seven-year senior secured notes (Ba2/BB) priced at par to yield 2 7/8%, tight to talk in the 3% area, and to initial talk in the low 3% area. The tranche size increased from $1 billion equivalent, or approximately €850 million.
An upsized $2 billion tranche of 10-year senior unsecured notes (B1/BB-) priced at par to yield 5 1/8%, tight to the 5 1/8% to 5¼% talk, and well inside of initial talk in the mid-to-high 5% area. The tranche size increased from $1.5 billion.
Both dollar-denominated tranches were heard to be heavily oversubscribed, with the unsecured tranche seeing a greater amount of demand than the secured tranche, according to a trader who added that there was strong real money support across both tranches.
The overall amount of a re-sized two-part bank loan deal also increased: The dollar-denominated term loan B was upsized to $3 billion from $1 billion, while the euro-denominated term loan B was downsized to €750 million from $1 billion equivalent.
The incremental proceeds from the notes and bank loan will be used to replace the contemplated $2 billion term loan A.
Morgan Stanley & Co. LLC will bill and deliver for the notes, and was the left lead bookrunner.
Upon release from escrow the proceeds plus cash on the balance sheet will be used to fund a dividend to Merck & Co., Inc., related to Organon's spinoff from Merck.
The Kenilworth, N.J.-based company was created by Merck's spinoff of its women’s health, trusted legacy brands and biosimilars businesses.
| Issuer: | Organon Finance 1 LLC to be assumed by Organon & Co.
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| Left books: | Morgan Stanley & Co. LLC (bill and deliver)
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| Joint books: | J.P. Morgan Securities LLC, BofA Securities Inc., BNP Paribas Securities Corp., Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs & Co. LLC, HSBC Securities (USA) Inc.
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| Co-managers: | Mizuho Securities USA Inc., Wells Fargo Securities LLC, Barclays, RBC Capital Markets LLC, Santander Investment Securities Inc., SG Americas Securities LLC, Bancroft Capital, LLC, CastleOak Securities L.P., Drexel Hamilton LLC, R. Seelaus & Co. LLC, Stern Brothers & Co.
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| Trade date: | April 8
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| Settlement date: | April 22
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| Distribution: | Rule 144A and Regulation S for life
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| Dollar-denominated senior secured notes
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| Amount: | $2.1 billion, increased from $2 billion
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| Maturity: | April 30, 2028
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| Coupon: | 4 1/8%
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| Price: | Par
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| Yield: | 4 1/8%
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| Spread: | 282 bps
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| Call protection: | Three years
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| Ratings: | Moody's: Ba2
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| S&P: BB
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| Price talk: | 4 1/8% to 4¼%
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|
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| Euro-denominated senior secured notes
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| Amount: | €1.25 billion, upsized from $1 billion equivalent
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| Maturity: | April 30, 2028
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| Coupon: | 2 7/8%
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| Price: | Par
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| Yield: | 2 7/8%
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| Spread: | 344 bps
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| Call protection: | Three years
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| Ratings: | Moody's: Ba2
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| S&P: BB
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| Price talk: | 3% area
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| Senior unsecured notes
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| Amount: | $2 billion, increased from $1.5 billion
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| Maturity: | April 30, 2031
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| Coupon: | 5 1/8%
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| Price: | Par
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| Yield: | 5 1/8%
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| Spread: | 348 bps
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| Call protection: | Five years
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| Ratings: | Moody's: B1
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| S&P: BB-
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| Price talk: | 5 1/8% to 5¼%
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