RLPC-US bankers welcome Actavis' $7bln syndicated loan

LONDON Thu Feb 20, 2014 1:45pm EST

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LONDON Feb 20 (Reuters) - U.S. bankers hungry for opportunities to lend to America's top companies are welcoming a $7 billion financing package backing generic drugmaker Actavis Plc's acquisition of Forest Laboratories.

Bank of America Merrill Lynch and Mizuho Bank are leading the financing for Actavis, which is the first sizeable bridge loan to be syndicated in the U.S. this year.

Dublin-based Actavis, the world's third-largest generics prescription drug manufacturer, announced plans to buy Forest Laboratories with a combination of cash and equity valued at approximately $25 billion, or $89.48 per Forest share, on Tuesday.

Investment-grade lending has been lukewarm in 2014 so far. January volume of $15.3 billion fell short of $17.8 billion in January 2013 and $21.2 billion in 2012, according to Thomson Reuters LPC data.

Activity so far this year has been dominated by refinancing and bankers are hoping for a pick-up in M&A activity to boost US high-grade loan volume for the first quarter.

"That's the first chunky investment-grade bridge (loan) this year," said a senior banker. "We're almost two months into the year. It's nice to at least have one to be talking about."

ANTICIPATING ACTAVIS

Actavis had a colourful loan market history before its acquisition by Watson Pharmaceutical in April 2012. The company was bought in a 4.7 billion euro leveraged buyout by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson in 2007.

Deutsche Bank was forced to hold a four billion euro loan on its balance sheet for nearly four years after Lehman Brothers collapsed.

The troubled loan was refinanced in 2010 and Watson Pharmaceuticals paid 4.25 billion euros for Actavis in April 2012.

A new Actavis was created when it bought Irish-domiciled Warner Chilcott for $8.5 billion in stock in May 2013.

Actavis' latest acquisition will bring together two of the world's fastest-growing specialty pharmaceutical companies. Combined annual revenues of more than $15 billion are anticipated in 2015.

The new $7 billion financing is split between a $1.75 billion, five-year term loan, a $3 billion bridge loan to a cash payment and a $2.25 billion, 364-day bridge loan to a bond issue.

The cash bridge loan will mature two months after the acquisition closes.

The pricing grid on the cash bridge loan and term loan ranges from 112.5 basis points (bps) for an A-/A3 rating to 187.5bps for a BB+-/Ba1 rating.

Pricing on the term loan opens at 162.5bps. This is higher than anticipated pricing of 137.5bps, and was increased after Standard & Poor's lowered Actavis' corporate credit rating to BBB- from BBB on Wednesday.

The pricing grid on the bond bridge loan opens at 150bps and ranges from 100bps to 175bps for the same ratings levels. It also includes margin step ups every three months until maturity.

The bond bridge loan also pays duration fees of 50bps ninety days after closing, 100bps six months after closing and 150bps one year after closing.

The term loan and bond bridge will be syndicated further in a retail sale which is expected to launch shortly.

Moody's Investors Service affirmed Actavis' Baa3 senior unsecured rating on Tuesday with a stable outlook. Standard & Poor's lowered its corporate credit rating on Actavis to BBB- from BBB with a stable outlook. (Editing by Tessa Walsh)

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