Warner Chilcott timing expected soon; Allen readies launch; Essar amendment well received

By Sara Rosenberg

New York, Sept. 4 - New deal activity seems to be picking up a little bit as a possible timeframe for the launch of Warner Chilcott plc's proposed multi-billion credit facility is anticipated to emerge after Labor Day and Allen Systems Group Inc. is scheduled to launch its credit facility on Thursday.

In other news, Essar Steel Algoma Inc.'s amendment was heard to be coming along nicely by Friday morning as talk was that a number of lender consents had already made their way in ahead of the close of business deadline.

Warner Chilcott timeframe

A general timeframe for the launch of Warner Chilcott's highly watched $2.75 billion senior secured credit facility is expected to come out sometime after Labor Day, a market source told Prospect News on Friday.

According to an 8-K recently filed with the Securities and Exchange Commission, the credit facility consists of a $250 million five-year revolver priced at Libor plus 350 basis points, a $1 billion five-year term loan A priced at Libor plus 350 bps and a $1.5 billion 51/2-year term loan B priced at Libor plus 375 bps.

Up to $350 million of the term loan A and/or the term loan B can be available as a 180-day delayed-draw loan.

All tranches will carry a 2.5% Libor floor.

The term loan A and the term loan B will be offered to lenders at an original issue discount of 98.

The revolver has a 75 bps commitment fee and the delayed-draw term loan commitment fee will be half of the drawn spread.

More Warner Chilcott details

Amortization on Warner Chilcott's term loan A is 10% in year one, 20% in years two, three and four, and 30% in year five, and amortization on the B loan is 1% per year with the balance due at maturity.

Financial covenants include a maximum leverage ratio opening at 4.25 times and decreasing until it reaches 2.5 times after Sept. 30, 2013, and an interest coverage ratio that opens at 2.0 times and increases until it reaches 3.0 times after Sept. 30, 2013.

Bank of America and Credit Suisse are the co-lead arrangers on the credit facility, and Bank of America, Credit Suisse, Barclays, Citigroup, JPMorgan and Morgan Stanley are the joint bookrunners. Credit Suisse is the administrative agent.

The banks have committed to provide 16 2/3% of the credit facility.

Warner Chilcott buying business

Warner Chilcott will use the proceeds from the credit facility to refinance its existing credit facility and to fund the purchase of Procter & Gamble Co.'s pharmaceuticals business for $3.1 billion.

Other funds for the refinancing and acquisition will come from the sale of $1.4 billion of senior unsecured notes.

As a backup for the bonds, the company has obtained a commitment for a $1.4 billion one-year bridge loan priced at Libor plus 800 bps with a 2.5% Libor floor. The spread increases by 50 bps after each three-month period.

JPMorgan and Morgan Stanley are the co-lead arrangers and bookrunners on the bridge loan, with fellow bookrunners Barclays, Bank of America, Citigroup and Credit Suisse. JPMorgan is the administrative agent on the bridge financing.

As is the case with the credit facility, the banks have committed to provide 16 2/3% of the bridge loan.

The transaction is expected to close in the fourth quarter, subject to regulatory approvals, the receipt of proceeds of the financing, the delivery of audited financial statements for the pharmaceuticals business and other customary conditions.

Warner Chilcott is a Rockaway, N.J.-based specialty pharmaceutical company.

Allen Systems coming up

Another new deal that is coming to market is Allen Systems Group's $355 million credit facility, which is scheduled to launch with a bank meeting on Thursday, according to a market source.

As was previously reported, the facility consists of a $20 million three-year revolver (B1), a $235 million four-year term loan B (B1) talked at Libor plus 550 basis points with a 3% Libor floor and a $100 million 41/2-year second-lien term loan (Caa1) talked at Libor plus 800 bps plus 200 bps PIK with a 3% Libor floor.

Bank of America is the lead bank on the deal that will be used to refinance existing debt.

Allen Systems is a Naples, Fla.-based enterprise software provider.

Essar Steel getting consents

Market chatter on Friday morning was that Essar Steel Algoma was getting lots of signature pages in towards its amendment proposal ahead of the 5 p.m. ET consent deadline, according to a market source.

The source went on to say that if he had to guess, he thinks the amendment will pass given the velocity in which pages were being received.

Under the amendment, the company is asking to eliminate the leverage and interest coverage ratio requirements for four quarters through the quarter ending June 30, 2010.

In return, pricing on the term loan would increase to Libor plus basis points and a 1.5% Libor floor would be added to the tranche, and lenders would receive a 50 bps amendment fee.

Furthermore, the company would be required to pay down $50 million of its term loan debt by Dec. 31 or it will pay a 7% fee on the amount of outstanding loans.

UBS is the administrative agent on the credit facility.

Essar Steel Algoma is a Sault Ste. Marie, Ont.-based steel producer.

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