Magellan Sets September Exit Deal

  • 10 Aug 2003
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Deutsche Bank will be shopping a five-year, $230 million credit facility for Magellan Health Services sometime after the Labor Day holiday. The credit will be effective upon Magellan's exit from bankruptcy, expected to take place next month. The facility will include a $100 million "B" loan, an $80 million synthetic term loan and a $50 million revolver, said a banker familiar with the deal. He did not comment on price talk and a Magellan spokeswoman said more pricing details are expected to emerge in filings released this week.

Magellan had originally planned an amended and restated credit with existing lead J.P. Morgan in conjunction with a previous plan of reorganization, the spokeswoman said. However, the company found the Deutsche Bank deal more appealing with a longer maturity and lower interest rates, a company statement notes. A J.P. Morgan spokesman could not provide comment by press time.

Proceeds from the credit will be used to pay in full Magellan's outstanding loans on its current credit amounting to about $160 million. Letters of credit from the current facility will carry over into the new deal. The existing deal is priced in the LIBOR plus 31/2-41/2% range. Onex Corp. has also made an equity commitment of $150 million in Magellan, giving the diversified company a controlling interest in the Columbia, Md.-based behavioral managed care organization. Magellan plans to use about $50-75 million of this equity commitment to reduce debt, with the remainder left in place for general corporate purposes. Magellan filed for Chapter 11 last March in order to deal with a $1.47 billion debt pile. A Deutsche Bank official declined to comment.

 

  • 10 Aug 2003

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