CVC Capital Partners Ltd. hired Goldman Sachs Group Inc. (GS:US) and Royal Bank of Scotland Group Plc to refinance the loan that funded its buyout of Formula One, according to three people with knowledge of the situation.
As part of the refinancing, the private-equity firm plans to transfer about $1 billion in cash from the operating assets of the auto-racing series to a company holding the Formula One stake, said the people, who declined to be identified because the deal is private.
Formula One started the process of extending its debt, which involves raising $2.27 billion of new credit facilities due in 2017 and 2018 to replace its existing $2.92 billion in loans due in 2013 and 2014, according to a statement today on the company’s website.
The $1 billion in cash may be used to pay a dividend to Formula One’s shareholders or for acquisitions in the future, according to the people.
“Proceeds raised will be kept within the group for general corporate purposes and the company has no current plans to pay a dividend,” Formula One said in the statement. “The new facilities will provide the business with a secure, long term capital structure.”
CVC is proposing a new term loan B of $1.38 billion and a new term loan C of $817 million for Formula One, with an interest margin of 500 basis points more than the London interbank offered rate, the people said. The Libor floor will be 1.25 percent. There is also a new $70 million revolving-credit facility paying interest margin of 450 basis points, according to the people.
Lenders are invited to a bank meeting on March 30 in London, said the people.
CVC is exploring a possible sale of a stake in Formula One in an initial public offering that may value the company at more than $10 billion, a person with knowledge of the matter said March 20.
CVC accumulated a controlling stake in Formula One in 2006 using $2.5 billion of loans. Other shareholders include the administrators of Lehman Brothers Holdings Inc., which hold 15.3 percent, and Formula One Chief Executive Officer Bernie Ecclestone’s former wife, Slavica, who owns 8.5 percent through Bambino Holdings. The racing series had annual sales of 1.17 billion euros ($1.56 billion) and employs 200 people, according to CVC’s website.
Libor, the rate at which banks say they can borrow in dollars from each other, serves as a reference for about $360 trillion of financial instruments worldwide. A basis point is 0.01 percentage point.
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