RLPC-Banks prepare 300 mln stg loan for Co-op pharmacy sell-off

LONDON Wed May 7, 2014 7:36am EDT

LONDON May 7 (Reuters) - Banks are preparing syndicated loans of around 300 million pounds ($509.77 million) to back a potential sale of Britain's Co-operative Group's pharmacy business, banking sources said on Wednesday.

Rothschild has been hired as adviser on the sale of the pharmacy business, which is at an early stage and is part of a wider restructuring of the member-owned group, the banking sources said.

The Co-op, a well-known high street presence with banks, supermarkets and funeral homes, said earlier this year that it was looking to shed non-core assets such as its 15 farms and 750 pharmacies to shore up its finances and revitalise the group.

"We are currently exploring the options for the future of our pharmacy business, which could lead to its sale. There has been significant early expressions of interest from potential buyers," a Co-op spokesperson said.

Presentations are taking place to banks so they can work out how much debt could be provided to potential buyers.

Bankers are preparing around 270-300 million pounds of debt financing to back a sale of the pharmacy unit or around 4.5-5 times the unit's approximate 60 million pounds earnings before interest, taxes, depreciation and amortisation (EBITDA).

Debt is likely to be in the form of senior leveraged loans and could include subordinated loans such as mezzanine or second lien financing.

Britain's Co-operative Group made a loss of 2.5 billion pounds in 2013, capping the worst 12 months in the mutual's 150-year history after being hit by a 1.5 billion pound capital shortfall at its bank, a drugs scandal involving ex-chairman Methodist minister Paul Flowers, and an exodus of top executives. [ID: nL6N0N91WL] ($1 = 0.5885 British Pounds) (Editing by Christopher Mangham)