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