LONDON Feb 20 U.S. bankers hungry for
opportunities to lend to America's top companies are welcoming a
$7 billion financing package backing generic drugmaker Actavis
Plc's acquisition of Forest Laboratories.
Bank of America Merrill Lynch and Mizuho Bank are leading
the financing for Actavis, which is the first sizeable bridge
loan to be syndicated in the U.S. this year.
Dublin-based Actavis, the world's third-largest generics
prescription drug manufacturer, announced plans to buy Forest
Laboratories with a combination of cash and equity valued at
approximately $25 billion, or $89.48 per Forest share, on
Investment-grade lending has been lukewarm in 2014 so far.
January volume of $15.3 billion fell short of $17.8 billion in
January 2013 and $21.2 billion in 2012, according to Thomson
Reuters LPC data.
Activity so far this year has been dominated by refinancing
and bankers are hoping for a pick-up in M&A activity to boost US
high-grade loan volume for the first quarter.
"That's the first chunky investment-grade bridge (loan) this
year," said a senior banker. "We're almost two months into the
year. It's nice to at least have one to be talking about."
Actavis had a colourful loan market history before its
acquisition by Watson Pharmaceutical in April 2012. The company
was bought in a 4.7 billion euro leveraged buyout by Icelandic
tycoon Bjorgolfur Thor Bjorgolfsson in 2007.
Deutsche Bank was forced to hold a four billion euro loan on
its balance sheet for nearly four years after Lehman Brothers
The troubled loan was refinanced in 2010 and Watson
Pharmaceuticals paid 4.25 billion euros for Actavis in April
A new Actavis was created when it bought Irish-domiciled
Warner Chilcott for $8.5 billion in stock in May 2013.
Actavis' latest acquisition will bring together two of the
world's fastest-growing specialty pharmaceutical companies.
Combined annual revenues of more than $15 billion are
anticipated in 2015.
The new $7 billion financing is split between a $1.75
billion, five-year term loan, a $3 billion bridge loan to a
cash payment and a $2.25 billion, 364-day bridge loan to a bond
The cash bridge loan will mature two months after the
The pricing grid on the cash bridge loan and term loan
ranges from 112.5 basis points (bps) for an A-/A3 rating to
187.5bps for a BB+-/Ba1 rating.
Pricing on the term loan opens at 162.5bps. This is higher
than anticipated pricing of 137.5bps, and was increased after
Standard & Poor's lowered Actavis' corporate credit rating to
BBB- from BBB on Wednesday.
The pricing grid on the bond bridge loan opens at 150bps and
ranges from 100bps to 175bps for the same ratings levels. It
also includes margin step ups every three months until maturity.
The bond bridge loan also pays duration fees of 50bps ninety
days after closing, 100bps six months after closing and 150bps
one year after closing.
The term loan and bond bridge will be syndicated further in
a retail sale which is expected to launch shortly.
Moody's Investors Service affirmed Actavis' Baa3 senior
unsecured rating on Tuesday with a stable outlook. Standard &
Poor's lowered its corporate credit rating on Actavis to BBB-
from BBB with a stable outlook.
(Editing by Tessa Walsh)