LONDON, June 19 (LPC) - A jumbo SFr5.4bn-equivalent (US$5.4bn) financing to back a SFr10.2bn sale of Nestle’s Skin Health business to a consortium led by EQT Partners and Abu Dhabi's ADIA is being shown to a select group of investors as banks get ready to sell down the debt.
The financing includes a SFr3.545bn, seven-year covenant-lite term loan, a SFr1.35bn, eight-year covenant-lite second-lien loan and a SFr500m, 6.5-year revolving credit facility.
There will also be SFr113m of cash on balance sheet at closing, the sources said.
The loans are split between euros and dollars and are expected to comprise around SFr1.075bn of euro term loans and SFr2.47bn of dollar term loans, guided to pay 375bp with a 0% floor. The dollar term loan will amortise at 1% per annum.
The second-lien is expected to be split between a SFr405m euro tranche and a SFr945m dollars tranche, guided to pay 750bp. The euro will come with a 0% floor and the dollars with a 1% floor.
The term loans will be offered with 101 soft call for six months, while the second-lien will be 102/101/par.
The second-lien is expected to be preplaced with funds including Bain and Park Square, the sources said.
Leverage will be 5.1 times through the senior and 7.2 times in total.
The loan is being shown to a select group of relationship investors over the next few days, before launching for general syndication to a broader investor base within a couple of weeks.
Credit Suisse and Deutsche Bank are leading the financing alongside a number of other banks including Bank of America Merrill Lynch, Barclays, Credit Agricole, Goldman Sachs, Jefferies, Mizuho, RBC and UBS.
EQT was not immediately available to comment.
Cash-rich investors seem eager to invest in the deal, which is new to the leveraged loan market.
They have struggled to put money to work so far in 2019, after a lack of large event-driven financings.
“It is good to have a genuinely new buyout loan, rather than the regurgitated deals that are so common as a result of secondary and tertiary buyouts," an investor said.
A second investor said: "It is good to have a loan of significant size in order to put a meaningful amount of money to work.”
Flexibility from debt investors will be paramount to EQT as the buyout firm could decide to pursue a divestment strategy on the Skin Health unit, which has two main businesses -- medical and consumer.
While the medical business, which includes prescriptions and aesthetics under the Galderma brand, are seen as a good fit for private equity, the consumer business that includes the Cetaphil and Proactiv brands has been seen as better suited to rival industry players and could therefore be sold off.
AT US$10.1bn, it is the second largest private equity-backed M&A deal in Europe since the financial crisis, after the €10.1bn buyout of Akzo Nobel’s chemicals business by Carlyle and Singaporean wealth fund GIC, according to Refinitiv data.
EQT and ADIA beat off stiff competition from rival buyout funds and some industry players including a consortium of Advent and Cinven, as well as US private equity firm KKR & Co Inc and European fund PAI Partners. Carlyle had also been looking at the medical business.
The proposed transaction with private equity firm EQT and ADIA is expected to close in the second half of 2019, pending regulatory approval.
In 2018, Nestle Skin Health had net sale of SFr2.805bn and adjusted Ebitda of SFr563m. (Editing by Christopher Mangham)