(Updates with trading level in third paragraph)
Oct. 20 (Bloomberg) -- Kinetic Concepts Inc., a wound-care company, set the interest rate it will pay on $2.5 billion of loans it’s seeking to back its buyout by Apax Partners Inc., according to a person with knowledge of the transaction.
A $1.63 billion term loan B maturing in 6 1/2 years will pay 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 portion will be sold at 96.5 cents on the dollar, compared with 95.5 cents to 96 cents initially proposed, said the person. The debt began trading at 99.5 cents on the dollar, according to information provider Markit Ltd.
The $250 million euro denominated term loan B due in 6 1/2 years will pay 5.75 percentage points more than Euribor, with a 1.25 percent floor. The San Antonio-based company will sell the loan at 95.5 cents on the dollar.
Kinetic won’t be able to refinance the term loan B portion during the first year, then can do so at 101 cents on the dollar in the second year, the person said. Lenders were originally offered soft-call protection of 102 cents and 101 cents on the debt, meaning the company would have had to pay 2 cents more than face value to refinance the slice during the first year and 1 cent during the second year.
Term Loan C
A $325 million term loan C piece maturing in 5 years will pay 5.25 percentage points more than Libor. The debt will have a 1.25 Libor floor and will be issued at 97 cents on the dollar, the person said.
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 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.
The company is also seeking a $200 million revolving line of credit due in five years. The revolver will pay 5.75 percentage points more than Libor and will be tied to a leverage-leverage based grid, according to the person.
Bank of America Corp., Morgan Stanley, Credit Suisse Group AG and Royal Bank of Canada arranged the deal for Kinetic.
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.
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