Bloomberg News

Kinetic Concepts Said to Rework Financing Backing Apax LBO

October 05, 2011

(Updates with call protection in fifth paragraph)

Oct. 5 (Bloomberg) -- Kinetic Concepts Inc., a wound care company, changed the structure and proposed rates on a portion of a financing backing it’s buyout by Apax Partners Inc., according to two people with knowledge of the deal.

A $2.6 billion term loan B maturing in seven years was cut to $2.2 billion and a senior secured bridge piece was increased by the same amount to $1.65 billion, said the people, who declined to be identified because the deal is private.

The term debt will pay 5.75 percentage points more than the London interbank offered rate, the people said. Libor, a rate banks charge to lend to each other, will have a 1.25 percent floor.

Kinetic Concepts is proposing to sell the loan at 95.5 cents to 96 cents on the dollar, reducing proceeds for the company and boosting the yield to investors, the people said.

Lenders are being offered soft-call protection of 102 cents and 101 cents, said the person. That means the company would have to pay 2 cents more than face value to refinance the debt during the first year and 1 cent during the second year.

The San Antonio-based company is also seeking a $200 million revolving line of credit maturing in five years.

Bank of America Corp., Morgan Stanley, Credit Suisse Group AG and Royal Bank of Canada are arranging the deal and lenders must submit commitments by Oct. 19 in New York. The deal is expected to close and fund on Nov. 4, the people said.

Bridge Financing

The senior secured bridge piece will pay 7 percentage points more than Libor, one of the people said. The lending benchmark will have a 1.5 percent minimum. A $900 million unsecured slice will pay 8.5 percentage points more than Libor and have a 1.5 percent floor, said the person.

Morgan Stanley, Bank of America, Credit Suisse Group and Royal Bank of Canada arranged the bridge financing and lenders must submit commitments by Oct. 7 in New York.

Kinetic Concepts expects to begin marketing high-yield bonds next week to replace the bridge debt, the person said.

Mike Barger, a spokesman for Kinetic Concepts, didn’t respond to an e-mail seeking comment.

Kinetic agreed to be taken private by Apax, the Canada Pension Plan Investment Board and the Public Sector Pension Investment Board for $68.50 per share.

In a revolving credit facility, the money can be borrowed again once it’s repaid; in a term loan, it can’t. A term loan B is mainly bought by non-bank lenders such as collateralized loan obligations, bank-loan mutual funds and hedge funds.

--Editors: Faris Khan, Chapin Wright

To contact the reporter on this story: Michael Amato in New York at mamato3@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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