Bloomberg News

Kinetic Concepts Makes Changes to Financing for Apax LBO

October 17, 2011

(Updates with term loan C pricing in third paragraph)

Oct. 17 (Bloomberg) -- Kinetic Concepts Inc., a wound-care company, changed the structure on a portion of the financing backing its buyout by Apax Partners Inc., according to a person with knowledge of the transaction.

A $2.2 billion term loan B maturing in seven years was cut to between $1.9 billion and $1.95 billion, said the person, who declined to be identified because the terms are private. The company is now seeking a five-year term loan C that would be between $250 million to $300 million, according to the person.

The term loan C is expected to price within 75 basis points of the term loan B that pays 5.75 percentage points more than the London interbank offered rate, the person said. The term loan B portion will have a 1.25 percent Libor floor and will be sold at 95.5 cents to 96 cents on the dollar, reducing proceeds for the San Antonio-based company and boosting the yield to investors.

Kinetic decided to seek the term loan C because of the approaching end of the reinvestment periods for older collateralized loan obligations, the person said. Those CLOs would need to wind down after their reinvestment periods are over. CLOs pool high-yield, high-risk loans and slice them into securities of varying risk and return.

The term loan C portion will give lenders a one-year soft- call protection of 101 cents, meaning Kinetic would have to pay 1 cent more than face value to refinance the debt during the first year, the person said.

Revolving Credit

The company is also seeking a $200 million five-year revolving line of credit.

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.

Kevin Belgrade, a spokesman for Kinetic Concepts, declined to 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 a 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. A basis point is 0.01 percentage points.

--Editors: Chapin Wright, Pierre Paulden

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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