| LONDON, Sept 25
LONDON, Sept 25 Bankers are pitching
multibillion pound financing packages to back the potential sale
or flotation of 107-year-old motoring services firm the AA and
over-50's insurance and travel company Saga, banking sources
said on Tuesday.
The two companies are owned by Acromas, which appointed
Ernst & Young to carry out vendor due diligence last week as its
private equity owners Charterhouse, CVC and Permira explore
valuations for the companies as two separate entities.
The AA could be sold or floated on the stock market for as
much as 5 billion pounds ($8.10 billion) while Saga has been
valued at around 3 billion pounds, banking sources said.
Acromas was formed in 2007 though the 6.2 billion pound
private equity-backed merger of AA and Saga, which was funded
with a 4.8 billion pound leveraged loan at the peak of the
Arrangers Barclays and Mizuho tried to syndicate the buyout
loan but were unable to do so after the market collapsed. Both
banks were forced to hold the debt although the business has
performed well in the interim.
Bankers pitched new debt packages to the AA and Saga in
September to cover either a sale or IPO. An acquisition would
require debt for either a corporate strategic buyer or a private
equity-led buyout and floatations usually require either pre- or
The debt packages are expected to include loans and bonds
and could be denominated in sterling and euros due to their
"Banks are pitching financing for two standalone businesses.
Both the loan and bond market would need to be accessed for such
a large deal and there isn't the capacity to raise all the debt
in pounds. Euros would be needed as well," a banker said.
A sale of AA would need around 3 billion pounds of debt and
Saga's debt financing would be smaller, bankers said.
Sale or flotation of the businesses would allow Acromas to
return cash to its private equity owners.
A decision is not pressing as Acromas's loans are not due to
be repaid until 2015. Other options include refinancing
Acromas's existing debt or a fresh capital injection from a new
investor. A decision is expected by mid-2013.
"As we approach the first phase of our debt maturity in
2015, shareholders of the business will inevitably want to
consider their options," a spokesman for Acromas said.
The euro zone crisis has reduced banks' ability to
underwrite large financing packages and difficult debt market
conditions are prompting financing discussions on jumbo buyouts
at an earlier stage than before the credit crisis.
Early financing discussions have also been seen recently on
the potential 8 billion pound sale of UK retailer M&S, which
would require a 4 billion pound debt financing.
(Reporting by Claire Ruckin; Editing by Tessa Walsh and