LONDON, Aug 22 (Reuters) - Banks have prepared a 725 million pound (1.20 billion US dollar) leveraged loan financing to back privately owned Bestway Group's acquisition of Britain's Co-operative Group's pharmacy business, banking sources said on Friday.
The Co-operative Group agreed to sell its pharmacy business to Bestway for 620 million pounds in July, following a formal sales process initiated by the mutually owned Co-op, reflecting its decision that the pharmacy business was not part of its future strategy.
JP Morgan and Nomura are leading the all senior loan financing, which will be launched for general syndication in September and sold to bank and institutional investors, the banking sources said.
An initial debt structure has been proposed and is being considered by lenders but could be adjusted before the financing is formally launched next month. The proposed deal comprises a 75 million pound revolving credit facility and 650 million pounds of senior term loans split between a 125 million pound, six-year term loan A and 525 million pound, seven-year term loan B, the sources said.
The revolving credit and TLA are guided to pay 400 basis points (bp) over Libor and the TLB is guided at 425bp over Libor, they said.
The term loan debt is guided with a 1 percent Libor floor, which guarantees a minimum return for investors. There is also 101 soft call for 12 months on the TLB. Original Issue Discounts are to be decided, they added.
Bestway was not immediately available to comment.
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 to shore up its finances and revitalise the group. Proceeds from the pharmacy sale will be used to reduce the Co-op's 1.4 billion pounds of debt and invest in its core businesses across its retail and consumer services arms.
Bestway's business includes the UK's second largest independent wholesaler serving 125,000 independent retailers and caterers. Its retail club business is the largest in the UK with over 4,000 members.
Bestway will have the right to operate under the Co-operative Pharmacy brand for a transitional period of 12 months. (1 US dollar = 0.6034 British pound) (Editing by Christopher Mangham)