Investors were gearing up for the scheduled launch today of the $1.25 billion credit backing the $2.6 billion acquisition of Time Warner's Warner Music Group (WMG) by an investor group led by Thomas H. Lee Partners, Edgar Bronfman Jr.'s Lexa Partners, Bain Capital and Providence Equity Partners. One loan investor said the deal should be pretty well received. "It's a new borrower, great sponsors," he said. "There's definitely going to be some buzz going around."
The credit comprises a six-year, $250 million revolver and a seven-year, $1 billion "B" loan. Pricing is LIBOR plus 23/4% on the revolver and LIBOR plus 3% on the "B" loan. The financing will also include $800 million of senior subordinated notes due 2014. Bank of America and Deutsche Bank are leading the deal.
WMG will have around $1.8 billion of debt, pro forma for the transaction. Excluding CD and DVD manufacturing, pro forma for the acquisition financing, 2003 gross debt-to-EBITDA was 5.7 times. Proposed financial covenants initially consist of minimum interest coverage of 2.25 times and maximum net debt-to-EBITDA of 6.5 times. These covenants progressively get tighter.
A B of A spokeswoman and Deutsche Bank spokesman declined comment. WMG officials and Scott Sperling, managing director at T.H. Lee, could not be reached by press time.