LONDON, Nov 27 (LPC) - Banks are lining up to provide around £1.4bn of debt to back the acquisition of UK forensic sciences group LGC by a private equity consortium led by European firms Cinven and Astorg, banking sources said.
A number of banks are expected to be appointed this week including HSBC, KKR Capital Markets, Morgan Stanley and Nomura, banking sources said.
The financing will total around 7.75-8.0 times LGC’s approximate £165m-£170m Ebitda and will consist of first-lien loans and subordinated debt either in the form of second-lien loans or mezzanine-like cash-pay and PIK.
While the financing is highly leveraged, the company is a well-known, well-liked credit in Europe’s leveraged loan market and is expected to be well received.
“LGC is awesome. Every bank will want a piece of it,” a syndicate head said when the company was up for sale.
The financing will be not too dissimilar to a staple financing offered by JP Morgan, HSBC and KKR Capital Markets during a competitive auction process, when the KKR looked to sell the company to an array of bidders.
While JP Morgan was on the staple, the bank is not expected to underwrite the buyout financing.
The financing will launch for syndication to investors in January, providing some relief to investors and bankers fearful that the pipeline for 2020 is rather sparse.
“This will be a good one to kick off the year,” a senior banker said.
Cinven and Astorg were not immediately available to comment.
New York-based private equity firm KKR bought LGC from Bridgepoint in 2015 for about £650m and helped the company grow through a string of acquisitions.
While Cinven has a focus on the pharmaceuticals and life sciences industry, Astorg has interests across software, healthcare, business-to-business, and technology-based industrial companies.
LGC last tapped the loan market in July 2019 when it raised an incremental €210m-equivalent leveraged loan to fund upcoming acquisitions. KKR was sole arranger of the loans, with Wilmington Trust acting as agent.
After that, LGC’s complete capital structure comprised a US$420m TLB paying 350bp over Libor; a €490m TLB paying 325bp over Euribor; a €115m TLB paying 400bp over Euribor; a €145m second-lien paying 650bp over Euribor; and a US$105m second-lien paying 675bp over Libor. There was also a £50m revolving credit facility, according to LPC data.
LGC previously had sterling loans but they were removed from the capital structure when LGC sold a business in the UK that generated most of its sterling cash flow. (Editing by Christopher Mangham)