Bloomberg News

Schaeffler Said to Increase Size of Term Loan C2 by $530 Million

February 15, 2012

Feb. 13 (Bloomberg) -- Schaeffler AG, the roller-bearing maker that controls tire company Continental AG, increased the size of a term loan by about 400 million euros ($530 million) and cut the interest margin offered in response to investor demand, according to two people with direct knowledge of the deal.

A term loan C2 being sold to non-bank investors was boosted to about 1.4 billion euros from an original 1 billion euros after U.S. investors oversubscribed the initial offer, said the people, who declined to be identified because the negotiations are private. The loan is now split between a $1.28 billion tranche and a 450 million-euro portion.

The dollar loan maturing in 2017 will now pay interest of 475 basis points more than the London interbank offered rate, the people said, and will be offered to investors at a price of 98 cents on the dollar with a 1.25 percent Libor floor. That compares with initial pricing of 550 basis points more than benchmarks, a discount of 97 cents on the dollar, and a 1.5 percent Libor floor.

The 450 million-euro portion of the term loan C2 will now pay interest of 500 basis points more than the euro interbank offered rate, a reduction of 50 basis points, with a discount of 97 percent to 97.5 percent of face value and a 1.5 percent floor on the benchmark lending rate, according to the people. Original issue discounts reduce proceeds for the company and boost the yield to investors. A basis point is 0.01 percentage point.

Arranging Banks

Lenders to both C2 tranches are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, said the people. The interest margin will also be cut an additional 25 basis points if the company’s leverage ratio declines to less than 2.5 times.

A term loan C1 being held by banks will retain pricing of 550 basis points more than benchmarks and will be reduced to 600 million euros from 1 billion euros as a result of the increased term loan.

BNP Paribas SA, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co., Commerzbank AG, Landesbank Baden- Wuerttemberg, Royal Bank of Scotland Group Plc and UniCredit SpA are arranging the financing as bookrunners and mandated lead arrangers, according to data compiled by Bloomberg.

Lender re-commitments on the euro-tranche are due 5 p.m. today London time and the deadline for the dollar-denominated loan is 5 p.m. New York time, one of the people said.

Schaeffler’s 6 billion-euro facility also includes a 1 billion-euro revolving credit and a 3 billion-euro term loan B that mature in 2015, paying initial interest of 425 basis points more than the benchmark rates, three people said Feb. 3.

The Herzogenaurach, Germany-based company sold 2 billion euros of bonds this month, double the amount originally planned, using proceeds to refinance a 2 billion-euro bridge loan taken as part of an 8 billion-euro debt facility in January.

--Editors: Chapin Wright, Faris Khan

To contact the reporter on this story: Stephen Morris in London at smorris39@bloomberg.net

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


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