RLPC-Ceva Sante sale backed by loan of more than 1 billion euros

LONDON Wed Feb 19, 2014 11:34am EST

LONDON Feb 19 (Reuters) - The sale of a minority stake in French veterinary pharmaceutical firm Ceva Santé Animale will be financed with a leveraged loan of more than 1 billion euros ($1.38 billion), banking sources said on Wednesday.

The loan will test the market as the first 'covenant-lite' loan for a European company. Covenant-lite loans do not have traditional maintenance covenants that protect investors. .

The loan also has aggressive total leverage levels of seven times Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA). Senior leverage is expected to be 5.25-5.5 times, several bankers said.

Ceva is the ninth-largest animal health group globally and has attracted interest from several private equity firms which are expected to submit bids of up to 1.5 billion euros in late February.

Banks are eager to finance new buyouts after low levels of M&A activity in 2013. Credit Agricole, Goldman Sachs, Natixis and Nomura have agreed to underwrite the loan, the bankers said.

The deal includes a 700 million euro term loan B; a 50 million euro revolving credit facility; and a 100 million euro capital expenditure facility, the bankers said.

A shareholder Payment-In-Kind (PIK) loan of around 200 million euros is also included which has been preplaced with a mezzanine fund of Ardian (formerly Axa Private Equity).

The loan will also have a 'double luxco' structure, which allows senior lenders to enforce security without going through French courts to avoid a potentially lengthy restructuring if the company defaults, the bankers said.

Ceva Sante and Ardian were not immediately available to comment.

Ceva was originally part of Sanofi-Aventis, which sold the company in 1999 to PAI Partners, which sold it in turn in 2003 to Sweden's Industri Kapital.

Management and employees bought a majority stake in 2007 and Euromezzanine and Natixis took a minority stake, backed with 433 million euros of loans, according to Thomson Reuters LPC data. Sagard joined as a minority shareholder in 2010.

Ceva focuses on the research, development, production and marketing of pharmaceutical products and vaccines for pets, livestock, pigs and poultry. ($1 = 0.7272 euros) (Editing by Tessa Walsh)

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