Kinetic Concepts has completed a comprehensive recapitalization plan that includes a new $580 million credit facility, taking advantage of the refinancing opportunity to replace amortizing debt. "Over the next several years the prior loans were maturing," said Jim Farrell, a managing director at Fremont Partners--an equity sponsor to Kinetic--and a Kinetic director. He explained that these loans were starting to meet their peak amortization period and the company also had other high-yield debt that was coming due over the next couple of years. In addition to the credit facility, the recap includes the issuance of $205 million of series A 73/8% senior subordinated notes and more than $263 million series A convertible preferred stock.
The new financing was used to replace the company's existing credit facility, redeem all of Kinetic's 95/8% senior subordinated notes due 2007 and to tender almost $590 million of Kinetic's outstanding common stock and vested options. Prior to this transaction, the company had $11.742 million outstanding on its "A" term loan, $57.068 million on each of its "B" and "C" pieces, $62.47 million on its "D" tranche and $19.878 million on its "E" loan. The loans bore effective interest rates between 3.67- 4.96% taking into account existing interest rate hedging arrangements and fees related to letters of credit and unused commitments. The new loan is priced at LIBOR plus 23/4% on the term loan and LIBOR plus 21/2% on the revolver.
Morgan Stanley and Credit Suisse First Boston lead the bank debt. "The company has strong outstanding relationships with both," said Farrell, regarding the choice for the lead banks.