content

LifeTime Fitness nets leveraged loan backing LBO by Leonard Green

Deutsche Bank, Goldman, Sachs, Jefferies, BMO Capital Markets, RBC Capital Markets, Macquarie Capital, and Nomura will provide debt financing for the acquisition of Life Time Fitness by Leonard Green & Partners and TPG.

The transaction announced earlier today is valued at more than $4 billion. Other key investors include LNK Partners and Life Time CEO Bahram Akradi, who will remain in his role and has committed to make a rollover investment of $125 million in Life Time common stock.

Under the terms of the merger agreement, the investors will acquire all of the outstanding shares of Life Time Fitness common stock for $72.10 per share in cash. This price represents a significant premium to Life Time’s closing share price of $41.60 on Aug. 22, 2014, the last trading day prior to the announcement that the issuer was exploring a potential conversion of real estate assets into a real estate investment trust.

Life Time had total debt of roughly $1.2 billion at year-end 2014, according to an SEC filing. EBITDA for the fourth quarter of 2014 was $86.8 million compared to $80.4 million in the year-ago equivalent period. For 2014, EBITDA was $374.3 million compared with $351.8 million in the prior-year period.

The merger is subject to approval from Life Time’s shareholders and other customary closing conditions. The transaction is currently expected to close in the third quarter of 2015. – Staff reports

content

Valeant adds underwriters as interest builds in $4.55B institutional loan backing Salix buy

Valeant Pharmaceutical’s $4.55 billion institutional term loan is seeing strong momentum a day after the deal’s official launch, sources said. The deal, which backs Valeant’s $14.5 billion acquisition of Salix Pharmaceuticals, has also drawn a large group of underwriters, investors were told at yesterday’s lender meeting.

The Deutsche Bank-led arranger group now includes HSBC, Bank of Tokyo-Mitsubishi UFJ, DNB Capital Markets, SunTrust Robinson Humphrey, Barclays, Morgan Stanley, RBC Capital Markets, and Citi. Senior management agents include BMO Capital Markets, CIBC, SMBC, and TD Securities. Barclays is administrative agent.

The seven-year institutional loan is talked at L+350, with a 0.75% LIBOR floor and a 99 offer price. Of note, a $1.8 billion portion of the new institutional loan (designated tranche F-2) will be available as a delayed draw to deal with the repayment of Salix’s convertible issues.

The loan pays a ticking fee of the full spread plus LIBOR floor after 30 days. The remaining $2.75 billion tranche F-1 will be funded at closing. Accompanying $1 billion TLA, which is also being syndicated, is delayed draw and pays 25 bps from closing.

Investors are offered six months of 101 soft call protection.

Commitments are due on Friday, March 13.

The senior secured financing includes a $1 billion, five-year A term loan and a $4.55 billion, seven-year institutional tranche. Like the existing loans, the new deal will be governed by secured-leverage and interest-coverage covenants. At current talk the institutional loan would yield roughly 4.5% to maturity. According to a commitment letter filed with the SEC, pricing on the new TLA is tied to a leverage-based grid from L+175-225, opening at L+225.

The issuer is also roadshowing $9.6 billion of bonds to back the purchase.

Pro forma net secured leverage is 2.2x, and net total leverage is 5.5x, sources noted.

Existing loans include 50 bps of MFN protection. As of Sept. 30, Valeant had $182.3 million outstanding under its A-1 term loan due April 2016 (L+225, no LIBOR floor), $166.3 million outstanding under its A-2 term loan due April 2016 (L+225, no LIBOR floor), roughly $1.81 billion outstanding under its A-3 term loan due October 2018 (L+225, no LIBOR floor), roughly $1.09 billion outstanding under its series D-2 B term loan due February 2019 (L+275, with a 0.75% LIBOR floor), $837.5 million outstanding under its series C-2 B term loan due December 2019 (L+275, with a 0.75% LIBOR floor), and roughly $2.54 billion under its series E-1 B term loan due August 2020 (L+275, 0.75% floor).

Valeant does not expect any change to its credit ratings as a result of the transaction. The company is currently rated BB-/Ba3.

The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval.

Valeant Pharmaceuticals, which is based in Laval, Canada, makes a broad range of pharmaceutical products. The company trades on the New York Stock Exchange under the ticker VRX with a market capitalization in excess of $68 billion. – Staff reports

content

Blue Coat nets financing for $2.4B buyout by Bain Capital

Jefferies will provide debt financing to back Bain Capital’s $2.4 billion purchase of Blue Coat Systems, which was announced earlier today, sources said.

Jefferies also led the issuer’s existing loan deal. Blue Coat in early 2014 repriced its covenant-lite term loan B due May 2019 to L+300, with a 1% LIBOR floor, and upsized it to $746 million. In June 2013, the issuer tapped the market via Jefferies and Goldman Sachs for a $330 million, second-lien term loan to finance a dividend. That loan cleared at L+850, with a 1% floor, and is callable at 102 through June, when the premium falls to 101, according to sources.

Thoma Bravo and an investor group that includes Teachers’ Private Capital purchased Blue Coat for $1.3 billion in early 2012, investing roughly $500 million in cash.

Sunnyvale, Calif.-based Blue Coat sells security software to businesses to protect against malware and control employee access to the Internet. – Chris Donnelly 

content

3 months after shelving loan C&J Energy revives financing backing Nabors merger

Arrangers Citigroup, Bank of America Merrill Lynch, Wells Fargo, and J.P. Morgan are reviving their M&A loan deal for C&J Energy Services. A lender call is set for Wednesday at 11:00 a.m. EST. The deal backs the merger with a unit of Nabors Industries.

Of note, the purchase price declined from $2.86 billion at the time of the June announcement, to $1.5 billion, due to a $250 million reduction in cash, to $688 million, and declines in C&J’s share price. The issuer would have roughly $1.1 billion of debt at closing, and would be leveraged at roughly 2.2x. Nabors would own 53% of the merged business, and C&J shareholders would own 47%.

Arrangers haven’t provided an updated financing plan following the purchase price reduction.

The loan deal backing C&J Energy’s with the Nabors Industries completion and production-services business originally totaled $675 million and was split between a $300 million, five-year TLB-1 and a $375 million, covenant-lite seven-year TLB-2. The TLB-1 included total-leverage, secured-leverage, and interest-coverage tests, and was talked at L+350-375, with a 0.75% LIBOR floor, offered at 99, for a yield to maturity of 4.57-4.82%. The covenant-lite TLB-2 had been talked at L+375-400, with a 1% floor, at 99, to yield 5.02-5.28%.

That structure was later revised to a $640 million, five-year TLB that was talked at L+400, with a 1% LIBOR floor, offered at 98, with total-leverage, secured-leverage, and interest-coverage tests. In addition to the four arrangers, the line-up included senior co-managers Capital One and Comerica, and co-managers Amegy, DNB, Nova Scotia, and Regions. Bank of America is administrative agent.

The issuer is rated BB-/Ba2, with a stable outlook from both agencies. The loans are rated BB+/Ba1, with a 1 recovery rating.

C&J Energy Services is an independent provider of premium hydraulic fracturing, coiled tubing, wireline, pumpdown, and other complementary oilfield services with a focus on complex, technically demanding well completions. – Chris Donnelly

 

content

Valeant outlines leveraged loan amendment related to $14.5B Salix purchase

Valeant this morning launched a slate of proposed changes to its credit facility that will be used to facilitate financing of its $14.5 billion acquisition of Salix Pharmaceuticals, according to an SEC filing. The company has asked lenders to waive total leverage and interest coverage tests that govern incremental borrowings.

That request is part of a larger slate of changes, and lenders are offered a 25 bps fee to approve. As reported, Deutsche Bank, HSBC, Bank of Tokyo-Mitsubishi UFJ, DNB Capital Markets, and SunTrust Robinson Humphrey have committed to provide a $1 billion, five-year incremental A term loan, a $4.55 billion, seven-year incremental B term loan, and a $9.6 billion unsecured bridge loan to finance the transaction, according to filings.

In addition to waiving the 5.25x total leverage and 3x minimum interest coverage tests to allow solely for the incremental loans to help finance the acquisition, Valeant is seeking covenant changes through the first quarter of 2016, including a modification of the interest coverage ratio to 2.25x, allowing for the incurrence of $750 million of additional unsecured debt, waiving of the 5.25x leverage governor in connection with any incremental borrowings, and altering the consolidated EBITDA definition to allow for add-backs of restructuring charges and fees and expenses tied the Salix purchase. The amendment package would also:

  • Waive mandatory prepayments from equity issuance used in the Salix deal or 2014 excess cash flow proceeds of roughly $250 million;
  • Modify the restricted payments covenant so that refinancing of Salix’s convertible notes and settlement of related warrants won’t be deemed RPs;
  • Permit the administrative agent under the credit agreement to enter into certain intercreditor agreements;
  • Increase cash netting from $350 million to $600 million;
  • For future permitted acquisitions change the no default and pro forma compliance conditions to the incremental from “at closing” to “at signing,” and waive incremental total leverage ratio conditions so that only the senior secured leverage ratio applies.

 

Ahead of this morning’s call, Valeant’s institutional loans were pegged in a 99.5/100 context, essentially unchanged from yesterday though off from levels bracketing par prior to yesterday’s M&A announcement, sources said.

Note the existing institutional loans include 50 bps of MFN protection. As of Sept. 30, 2014, Valeant had $182.3 million outstanding under its A-1 term loan due April 2016 (L+225, no LIBOR floor), $166.3 million outstanding under its A-2 term loan due April 2016 (L+225, no LIBOR floor), roughly $1.81 billion outstanding under its A-3 term loan due October 2018 (L+225, no LIBOR floor), roughly $1.09 billion outstanding under its series D-2 B term loan due February 2019 (L+275, with a 0.75% LIBOR floor), $837.5 million outstanding under its series C-2 B term loan due December 2019 (L+275, with a 0.75% LIBOR floor), and roughly $2.54 billion under its series E-1 B term loan due August 2020 (L+275, 0.75% floor). According to the commitment letter, pricing on the new TLA is tied to a leverage-based grid from L+175-225, opening at L+225. Pricing on the new TLB, meanwhile, is outlined at L+350, with a 0.75% LIBOR floor.

Pricing on the bridge loan would open at L+575, increasing 50 bps every 90 days. Note that market conditions at the time of syndication typically dictate actual price talk. The incremental TLA would amortize at a rate of 5% in the first year, 10% in the second, and at 20% thereafter. As reported, Valeant plans to acquire all of the outstanding common stock of Salix for $158 per share in cash in a transaction valued at $14.5 billion. As a result of the need to draw-down inventories, EBITDA will be artificially low in 2014 and 2015, resulting in initial pro forma net leverage of roughly 5.6x. Valeant said it is committed to reducing its net-leverage ratio to below 4x by the second half of 2016. Valeant does not expect any change to its credit ratings as a result of the transaction.

The company is currently rated BB-/Ba3. The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval. NYSE-listed Valeant Pharmaceuticals, which is based in Laval, Canada, makes a broad range of pharmaceutical products. Salix Pharmaceuticals is based in Raleigh, N.C and is rated B/B1. – Staff reports

content

Dollar Tree readies $7B leveraged loan backing Family Dollar buy

Arrangers J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, RBC Capital Markets, and US Bank have scheduled Dollar Tree’s M&A loan deal for launch with a lender meeting on Monday, Jan. 26, at 2:00 p.m. EST, sources said.

The financing backing the purchase of Family Dollar is now structured as a $1.25 billion, five-year revolver, a $500 million, five-year term loan A, and a $5.2 billion, seven-year term loan B.

The underwriting group now includes PNC, TD Securities, Capital One, Regions Bank, Citizens Bank, Bank of Tokyo-Mitsubishi UFJ, SunTrust Robinson Humphrey, SMBC, HSBC, Fifth Third, and Huntington National.

The original commitment called for $5.4 billion of term debt and $2.8 billion in new senior unsecured notes, sources said. Earlier, Dollar Tree said it would also use $569 million of available cash and a $240 million revolver draw to back the acquisition.

Family Dollar shareholders approved the transaction earlier this week, and closing is expected in March.

The combination of Dollar Tree and Family Dollar would create the largest discount retailer in North America by number of stores.

Chesapeake, Va.-based Dollar Tree operates variety stores in the U.S. and Canada. – Chris Donnelly/Richard Kellerhals

content

Pabst to be acquired by Russia’s Oasis Beverages, PE firm TSG nets minority stake

pabst2UBS is leading the debt financing that will back the acquisition of Pabst Brewing Company by Oasis Beverages, according to sources. Private equity firm TSG Consumer Partners will take a minority stake in the business. No other details of the acquisition or the financing were disclosed.

Oasis is a beer and beverage company with operations in Russia, Ukraine, Kazakhstan, and Belarus. Current Oasis chairman and founder Eugene Kashper will serve as the CEO of Pabst.

Current owner C. Dean Metropoulos & Co. acquired Pabst in 2010 from Kalmanovitz Charitable Foundation for $250 million, according to S&P Capital IQ.

Pabst Brewing’s portfolio includes iconic brands such as Pabst Blue Ribbon, Lone Star, Rainier, Ballantine IPA, Schlitz, Old Style, Stroh’s and Old Milwaukee. The company was founded in 1844 and is based in Los Angeles, Calif. – Staff reports

content

Burger King nets financing for Tim Hortons merger

burgerkingBurger King Worldwide has obtained commitments for $12.5 billion of financing to fund the cash portion of its merger with Tim Hortons, including a $9.5 billion debt financing package led by JP Morgan and Wells Fargo, the company announced.

The debt financing for the transaction, which was unveiled today, will consist of a $6.75 billion TLB, a $500 million revolving credit, and senior secured second-lien notes in the amount of $2.25 billion. In addition, Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business, sources said.

Burger King has roughly $685.6 million outstanding under its current TLB due 2019 and $965.6 million under its TLA due 2017, part of its $2.8 billion of long term debt, sources said.

The transaction is subject to customary closing conditions, including approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the U.S. Since 3G Capital already owns approximately 70% of the shares of Burger King and has committed to vote in favor of the combination, no shareholder vote is required of Burger King shareholders.

The merger will create a quick service restaurant company with roughly $23 billion in system sales and over 18,000 restaurants in 100 countries. Following the closing of the transaction, each brand will be managed independently.

Under the terms of the transaction, which has been unanimously approved by each company’s Board of Directors, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share. Based on Burger King’s unaffected closing stock price on Aug. 22, 2014, this represents total value per Tim Hortons share of C$89.32, and based on Burger King’s closing stock price on Aug. 25, 2014, this represents total value per Tim Hortons share of C$94.05. As an alternative to the default mixed transaction consideration described above, each Tim Hortons shareholder will have the ability to elect to instead receive, for each Tim Hortons share held, either C$88.50 in cash; or 3.0879 common shares of the new company, in each case subject to pro ration.

The C$89.32 unaffected offer value represents a premium of 39% based on the volume weighted average price of Tim Hortons stock over the past 30 days ending Friday Aug. 22, 2014, and a 30% premium based on Tim Hortons closing stock price on Aug. 22, 2014.

3G Capital will retain all of its investment in Burger King by converting its roughly 70% equity stake in Burger King into equity of the new company. On a pro forma basis, 3G Capital is expected to own approximately 51% of the new company with the balance of the common shares to be held by current public shareholders of Burger King and Tim Hortons.

Upon completion of the transaction, each outstanding common share of Tim Hortons will be converted into the right to receive C$65.50 in cash and 0.8025 of a common share of the new parent company, which is subject to the right of the holders of Tim Hortons common stock to make elections as noted above. Upon completion of the transaction, each outstanding common share of Burger King will be converted into 0.99 of a share of the parent company and 0.01 of a unit of a newly formed Ontario limited partnership controlled by the new parent company, however, holders of shares of Burger King common stock will be given the right to elect to receive only partnership units in lieu of common shares of the new parent company, subject to a limit on the maximum number of partnership units that can be issued.

Shares of the new parent company will be traded on the New York Stock Exchange and the Toronto Stock Exchange, and units of the new partnership will be traded on the Toronto Stock Exchange. The partnership units will be convertible on a 1:1 basis into common shares of the new parent company, however, the units may not be exchanged for common shares for the first year following the closing of the transaction. Holders of partnership units will participate in the votes of shareholders of the new parent company on a pro-rata basis as though the units had been converted. 3G Capital has committed to elect to receive only partnership units.

The transaction is expected to be taxable, for U.S. federal income tax purposes, to the shareholders of Burger King, other than with respect to the partnership units received by them in the transaction. The transaction is expected to be taxable to shareholders of Tim Hortons in the U.S and Canada. – Chris Donnelly

 

content

Charter sets meeting tomorrow to launch $7.4B of leveraged loans for M&A, 3-part with Comcast and Time Warner

charter_communications_logoCharter Communications is launching $7.4 billion of incremental institutional term loans via a lender meeting tomorrow at 2:00 pm EDT, sources said. The funding will come as new tranche G and H loans, which are expected to have different maturities, the sources added.

Goldman Sachs, Bank of America Merrill Lynch, Credit Suisse, and Deutsche Bank have underwritten term debt totaling up to $8.4 billion and a $500 million revolver in connection with Charter’s purchase of certain assets of Comcast Corp. The remaining $1 billion of that commitment will be a $1 billion revolver that’s not on offer to the market, sources noted.

The cable operator has in place a $1.5 billion TLE due 2020 and a $1.2 billion TLF due 2021, both of which are priced at L+225, with a 0.75% LIBOR floor.

In April, Charter and Comcast announced a three-part plan that would grow Charter’s subscriber base and help with regulatory hurdles for Comcast’s $45 billion acquisition of Time Warner Cable.

According to regulatory filings, following the completion of Comcast’s merger with Time Warner Cable, Charter will acquire roughly 1.4 million existing Time Warner Cable subscribers, increasing its video customer base from 4.4 million to roughly 5.7 million and making Charter the second largest cable operator in the U.S.

Charter and Comcast also agreed to transfer assets involving roughly 1.6 million former Time Warner customers and 1.6 million Charter customers in a tax-efficient exchange, improving the geographic presence of both companies. Additionally, Comcast will spin off a new entity composed of cable systems serving roughly 2.5 million Comcast customers to its shareholders, with Charter acquiring approximately 33% of the equity of the spin-off in exchange for 13% of the equity of a new holding company of Charter.

The three-part plan is contingent upon completion of the Comcast and Time Warner merger. – Staff reports

content

KeyCorp buys middle market investment bank Pacific Crest

keyIn a drive to become the leading middle market corporate and investment bank, KeyCorp said it acquired Pacific Crest Securities.

Pacific Crest Securities, which is a technology-focused investment bank and capital markets firm, will become part of KeyBanc Capital Markets. The transaction is expected to close in the third quarter if regulators approve the deal.

Pacific Crest Securities, based in Portland, Oregon, employs 170 and has expertise in internet and digital media, software and systems, communications, semiconductors, and clean technology. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more