LONDON, July 11 Private equity firm BC Partners is set to take around 120 million euros ($163.69 million) as a dividend from its German pharma company Aenova as part of a wider 730 million euro covenant-lite loan refinancing, banking sources said on Friday.
BC Partners acquired Aenova in 2012 from Bridgepoint in a deal that valued the company at around 500 million euros, backed with 230 million euros of senior loans. It raised a further 57 million euros of loans for its acquisition of pharma company Temmler Group in 2012 and 130 million euros of loans for its acquisition of German peer Haupt Pharma last year, according to Thomson Reuters LPC data.
It has now decided to conduct a dividend recapitalisation - a process whereby debt in a business is refinanced and increased in order for shareholders to take a dividend payment.
BC Partners was not immediately available to comment.
Deutsche Bank and JP Morgan are arranging the financing which is split between a 470 million euro, six-year term loan B paying an interest margin of 400 basis points over Euribor and a 30 million pound, six-year term loan B paying 450bps over Libor as well as a 155 million euro, seven-year second lien facility paying 700bps over Euribor. All tranches have a 1 percent Euribor/Libor floor.
The TLB is guided with an original issue discount (OID) of 99.5 and the second lien is guided with 99 OID, the banking sources said.
There is also a 50 million euro, six-year revolving credit facility and a 25 million euro six-year acquisition facility both paying 375bps over Euribor, the banking sources said.
The deal will be shown to investors at a bank meeting in London on July 15 with commitments due July 29.
The financing will be done on a covenant-lite basis, removing traditional maintenance covenants that protect investors.
The supply/demand imbalance in Europe's leveraged loan market has created an excess of liquidity that investors are eager to put to work. Keen to keep product in the loan market rather than see borrowers tap the high-yield bond market, European investors conceded to covenant-lite deals and are now gaining appetite for second-lien loans, which offer better yield than tightening first-lien paper.
The dividend recapitalisation will take Aenova's debt to earnings to around 5.8 times in total from a current level of 4.8 times.
Aenova was formed by Bridgepoint through the merger of Swiss Caps, a maker of soft capsule vitamins, supplements and pharma products, with Dragenopharm, a German contract manufacturer for the prescription drugs market. It employs about 2,500 staff. In 2013 Aenova had EBITDA of 90 million euros and is targeting EBITDA of 110 million in 2014. ($1 = 0.7331 Euros) (Editing by Christopher Mangham)