LONDON Acromas-owned Saga, the over-50s consumer and financial services business, is undertaking a 1.4 billion pound ($2.34 billion) refinancing to get its debt in better shape to pave the way for a possible listing, banking sources said.
Acromas is owned by private equity firms Charterhouse, CVC and Permira and was formed in 2007 though the 6.2 billion pound merger of the AA and Saga. Last year, Acromas split Saga and the AA with the possible intention to sell the AA and float Saga.
"We are refinancing Saga's debt on more attractive and longer terms that will get the company's financing in better shape whether we decide to IPO or not. If an IPO were to take place we would want our customers to play a part in it," said Paul Green, director of communications at Acromas.
Green declined to give a figure for the refinancing but banking sources put the amount at 1.4 billion pounds.
CVC, Charterhouse and Permira declined to comment.
The refinancing will give Saga cheaper and longer dated debt and will be structured to enable it to remain in place following a listing, which could take place as soon as May, banking sources said.
Saga is contacting its customers, which total around 2.5 million, to see if they would be interested in a Saga flotation.
Bank of America Merrill Lynch, Goldman Sachs and Mizuho are leading the refinancing and were joined by Citi Group, Credit Suisse, JP Morgan, Lloyds, RBS, UBS, ING and Santander, banking sources said.
The refinancing includes an 825 million pound term loan A maturing in 2019, paying 375 basis points (BPS) over Libor; a 425 million pound term loan B maturing in 2020, paying 425 bps over Libor; and a 150 million pound revolving credit facility, paying 375 bps over Libor, the sources said.
The refinancing will be around 5.1x leveraged but this will reduce to around 3-3.5x leverage if some of the proceeds of a listing are used repay part of the debt, the sources said.
The debt is being sold to institutional investors and banks and commitments are due April 16, the sources said.
Bankers have also been working on proposals to refinance around 1 billion pounds of loans in the AA, prior to a possible sale of the firm. It would be the second refinancing of AA's debt after it completed a 3 billion pound loan and bond financing last year to facilitate a split with Saga.
($1 = 0.5971 British Pounds)
(Editing by Mark Heinrich)