NEW YORK, May 17 (Reuters) - Formula One’s new refinancing loan has drawn an anchor order of $200 million from an institutional account at 350bp over Libor with a 1 percent Libor floor and a discount of 98 cents on the dollar, buyside sources told Thomson Reuters LPC. The loan also has 101 soft call protection.
Meanwhile, investors are asking Formula One to pay them the 101 call protection on the existing loan in exchange for rolling into the new loan. Formula One is trying to get around paying the call premium, saying that it does not apply to repricings in connection with an initial public offering (IPO), according to several investors looking at the deal.
Standard & Poor’s has placed Formula One’s B+ corporate credit rating on CreditWatch positive.
Formula One has been shopping a $1.3 billion term loan B due June 2018 to institutional loan investors a mere three weeks after clearing a $1.38 billion term loan B due April 2017 through the market.
Initial price guidance on the new $1.3 billion term loan B was floated at 325-350bp over Libor with a 1 percent Libor floor and a discount of 99 cents on the dollar.
The term loan B, along with a $50 million revolving line of credit and a $450 million term loan A which is to be sold mainly to bank lenders, will refinance Formula One’s existing debt in conjunction with the company’s upcoming IPO.
The new loan will continue to have covenants governing leverage and interest coverage. Pro forma for the new loan, net leverage would drop to around three times from 4.5 times in April, sources said.
As previously reported, the refinancing is contingent on a successful IPO of the company. Formula One is expected to complete its IPO by around June 14.
Last month, Formula One sold to institutional loan investors in the U.S. and Europe a $1.38 billion term loan B due April 2017. That loan was priced at 450bp over Libor with a 1.25 percent Libor floor. It was offered to investors at 99 cents on the dollar. The rest of the credit was filled out by a $70 million revolving line of credit due 2017 and an $817 million term loan C due 2018. The term loan C is said to have been sold to “friends and family” of Formula One sponsor CVC Capital.
Formula One proposed to use the funds from the overall $2.267 billion credit as follows: $1.784 billion to repay existing bank debt due 2012-2014, $1.06 billion to issue a dividend, $46 million to put cash on the balance sheet and another $46 million in estimated fees and expenses.
As part of the dividend recap, the refinancing allowed Formula One’s shareholders, including majority owner CVC Capital, to transfer around $1 billion of cash to holding company Delta Topco for a range of purposes, including dividends and acquisitions.
CVC Capital bought Formula One in April 2006, backed by $2.1 billion of debt. In 2007, the debt was recapitalized with $2.92 billion of debt consisting of an $800 million term loan A at 200bp over Libor, a $1.4 billion term loan B at 237.5bp over Libor, a $70 million revolving credit at 200bp over Libor and a $650 million second-lien loan at 350bp over Libor.