(Updates with financial covenant in fourth paragraph)
Oct. 6 (Bloomberg) -- Emdeon Inc., the provider of billing systems and software for health-care companies, set the initial interest rate on a $1.2 billion term loan B it’s seeking to finance the company’s buyout by Blackstone Group LP, according to a person with knowledge of the transaction.
The seven-year debt will pay 5.5 percentage points to 5.75 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, a rate banks charge to lend to each other, will have a 1.25 percent floor.
The Nashville, Tennessee-based company is proposing to sell the loan at 96 cents to 97 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.
The loan, which originally had no financial-maintenance requirements, will now have a first-lien net leverage covenant.
Lenders are offered a one-year soft call protection of 101 cents, the person said, meaning Emdeon would have to pay one cent more than face value to refinance the debt during its first year.
Emdeon is also seeking a $125 million revolving line of credit maturing in five years.
Bank of America Corp., Barclays Plc, Citigroup Inc., Goldman Sachs Group Inc. and SunTrust Banks Inc. are arranging the deal and lenders must submit commitments by Oct. 14 in New York. The deal is expected to close and fund the week of Oct. 31, the person said.
Peter Rose, a Blackstone spokesman, declined to comment.
A term loan B is mainly bought by non-bank lenders such as collateralized loan obligations, bank-loan mutual funds and hedge funds. In a revolving credit, money can be borrowed again once it’s repaid; in a term loan, it can’t.
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