NEW YORK May 18 Formula One has priced its $1.3 billion institutional term loan B at 350bp over Libor with a 1 percent Libor floor and a discount of 98 cents on the dollar, sources told Thomson Reuters LPC.
The issuer has also added a 100bp annual ticking fee, which is to be paid from the loan's allocation date till its closing date or cancellation. Formula One will pay the fee whether or not it lists its initial public offering (IPO). The maximum amount of the payment is capped at around $1.6 million.
If the IPO is not priced by June 30, the term loan commitments will be cancelled. But the loan commitments will be available for another 10 days if the IPO pricing occurs by June 30. Formula One is aiming for a June 14 IPO.
Essentially, the new term loan becomes effective upon the completion of a successful IPO. If the IPO is unsuccessful, Formula's One's existing $1.38 billion term loan B from April will stay in place.
As per the terms of the new loan, the existing loan must be repaid in full. "The new facilities are $450 million less than the existing facilities, so this would force at least that much debt reduction," said a buyside investor committing to the new loan.
Commitments to the new term loan are due today at 4:00 p.m. Goldman Sachs and RBS lead the loan.
Yesterday, Formula One was believed to have received 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 had been dissatisfied with Formula One's decision not to pay them the 101 call protection on the existing loan in exchange for rolling into the new loan. Formula One told lenders that the call premium on the existing loan did not apply to repricings in connection with an IPO, according to several investors looking at the deal.
Formula One's existing corporate family and facility ratings are Ba3/B+ and Ba3/BB-, respectively. They are both expected to be raised to Ba2/BB- and Ba2/BB, respectively.
Formula One has been shopping the new $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 new term loan B, along with a $50 million revolving line of credit and a $450 million term loan A marketed mainly to bank lenders, will refinance Formula One's existing debt in conjunction with the company's upcoming IPO. The $50 million revolver and $450 million term loan A are priced at 275bp over Libor.
The new loan will continue to have covenants governing leverage and interest coverage. Pro forma for the new loan, total leverage would drop to 3.28 times from 4.5 times in April, sources said.
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 2012-14, $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.