LONDON May 3 The 4 billion pound ($6.20
billion) refinancing of Acromas, the private equity-owned firm
behind travel company Saga and British motoring
services firm the AA, will see a splitting of the two
businesses into separate entities.
An IPO is planned for Saga and the AA will be turned into a
Triple B rated investment-grade company by having its debt
restructured into a whole-business securitisation.
The refinancing is expected to launch within a month and
around 10 banks are working on the deal. Acromas is owned by
private equity firms Charterhouse, CVC and
Permira and was formed in 2007 through the 6.2 billion
pound merger of the AA and Saga.
"We have made it clear that we will do something in good
time before September 2015 when the first capital repayment is
due. We remain focused on delivering for our customers," Acromas
director of communications Paul Green said.
Ernst & Young was appointed last year to carry out
due diligence and explore valuations for the companies as two
By splitting up the two businesses, the majority of
Acromas's 4 billion pound debt pile will be put on to the AA,
leaving Saga relatively light in debt and able to undertake an
Around 2.5 billion pounds of underwritten bridge loans, with
a maturity of around three to five years, will be slowly sold to
the sterling bond market as a WBS where they are expected to
gain up to a 30-year maturity. In addition, around 650 million
pounds of high-yield bonds will be issued by the AA, outside the
Deutsche Bank and RBS are driving the WBS, while Barclays
and Mizuho - the banks that were left with Acromas's existing
debt for six years after they were unable to syndicate it due to
the onset of the financial crisis - are likely to form part of
the wider bank group making up the refinancing. Other banks
close to the deal include Bank of America Merrill Lynch, Bank of
Tokyo-Mitsubishi, HSBC, Lloyds, RBC and UBS.
By becoming investment grade, the AA's debt will be cheaper
to service compared with a leveraged refinancing. The loan will
have an interest margin of around 250bp that will step up over
Acromas has performed well since its 2007 acquisition, which
was backed with 4.8 billion pounds of debt. Its net bank and
other borrowings stood at 4.1 billion pounds in the 2011-2012
The decision to refinance comes amid stronger credit market
conditions, with an excess of liquidity and a willingness from
banks to do deals.
WBS are gaining favour as they produce attractive
investment-grade paper with a good yield - something that is
hard to come by in the current environment.
"The WBS on the AA absolutely makes sense as it is a way to
get in place a solid, sensible financing in a market that has
the liquidity to support it," said a banker involved. "Sterling
leveraged financing is not easy to come by, so the WBS gives the
AA access to the investment-grade market that will be supportive
and it gives it a capital structure which can survive a change
"The AA is credit that people recognise: it is a strong
credit and investors know, understand and like it, so it should
be well received."
($1 = 0.6447 British pounds)
(Editing by Christopher Mangham)