RLPC-Acromas refinancing paves way to split AA, Saga

LONDON, June 18 Tue Jun 18, 2013 1:12pm EDT

LONDON, June 18 (Reuters) - Acromas, owner of British motoring services firm the AA and over 50s insurance firm Saga, is refinancing 3.062 billion pounds of existing debt to pave the way for a break up of the company.

Acromas, which is owned by private equity firms Charterhouse, CVC and Permira, was formed in 2007 at the peak of the market through the 6.2 billion pound merger of the AA and Saga.

The loan and bond refinancing package is a prelude to splitting the AA and Saga into two separate entities. This will leave Saga able to pursue an Initial Public Offering (IPO) with relatively little debt.

Most of Acromas's 4 billion pound debt pile will be left in the AA, which will become a triple B rated investment-grade company by having its debt restructured into a whole-business securitisation.

The refinancing package consists of a 1.9 billion term loan, a 150 million pounds working capital facility, both of which mature in July 2018, and a 220 million pounds, 364-day liquidity facility.

As part of the refinancing, 500 million pounds of class A bonds and 655 million pounds of class B secured bonds will also be issued.

The term loan pays an initial interest margin of 275 basis points (bps) over LIBOR with price step ups over time, the working capital facility pays an opening margin of 325 bps and the liquidity facility pays 275 bps out of the box.

The banks arranging the loan refinancing are Deutsche Bank, Royal Bank of Scotland, Bank of America, Bank of Tokyo-Mitsubishi UFJ, Barclays Bank, HSBC Bank, Lloyds TSB Bank, Royal Bank of Canada and UBS.

The new senior term loan and class A and B notes will be used with 7.7 million pounds of available cash, to repay 2.038 billion pounds of the existing senior loans and to fully repay an expensive 934.4 million pound mezzanine facility.

After the refinancing, around 1.58 billion pounds of the existing senior term loan will remain in place, along with a 215 million pound revolving credit facility.

The existing financing is due to mature on September 30, 2017 and pays a margin of 475 bps over LIBOR, which increases over time. (Editing by Tessa Walsh)