September 24, 2019 / 2:31 PM / 21 days ago

Banks line up £1.4bn financing for possible LGC sale

LONDON, Sept 24 (LPC) - Bankers are working on debt financings totalling around £1.4bn-equivalent to back a potential sale of UK forensic sciences group LGC as potential buyers get set to submit bids.

KKR acquired LGC from Bridgepoint in December 2015 and has put the company up for sale, with first round bids due on October 8 in an auction process.

Advent, Bain, Blackstone, Carlyle, Cinven, EQT and H&F are expected to submit bids for the company, which has also attracted the attention of trade buyers including medical device makers Thermo Fisher Scientific and Danaher, banking sources said.

All of the private equity firms and trade buyers either declined to comment or were not immeditaley available to comment.

JP Morgan, HSBC and KKR Capital Markets are expected to provide a staple financing backing a possible sale that will be offered to all sponsors.

The staple financing is expected to comprise senior and junior leveraged loans denominated in euros and dollars. It will total around 7.5-7.75 times LGC’s approximate £165m-£170m Ebitda, the sources said.

Other banks are also working on financing packages of similar levels to back private equity firms looking to bid.

At 7.5-7.75 times, the leverage levels are quite aggressive, but LGC is a strong performer that is well known to the leveraged loan market, banking sources said.

“LGC is awesome. Every bank will want a piece of it,” a syndicate head said.

LGC last tapped the loan market in July 2019 when it raised an incremental €210m-equivalent leveraged loan to fund upcoming acquisitions. KKR was sole arranger of the loans, with Wilmington Trust acting as agent.

After that, LGC’s complete capital structure comprised a US$420m TLB paying 350bp over Libor; a €490m TLB paying 325bp over Euribor; a €115m TLB paying 400bp over Euribor; a €145m second-lien paying 650bp over Euribor; and a US$105m second-lien paying 675bp over Libor. There was also a £50m revolving credit facility, according to LPC data.

LGC previously had sterling loans but they were removed from the capital structure when LGC sold a business in the UK that generated most of its sterling cash flow. (Editing by Christopher Mangham)

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