Warburg Pincus received a welcome reception from the debt markets when raising $695 million in funded debt for its acquisition of TransDigm Holding Co., said Kewsong Lee, managing director at Warburg Pincus. The "B" loan was flexed down 75 basis points and the size of the notes offering was increased after investors favored the structure and pricing, added James Neary, also a managing director at Warburg Pincus.
Credit Suisse First Boston leads the credit with Bank of America, while UBS and GE Capital also joined the deal at the agent level. Neary said CSFB proposed an aggressive financing package that appealed to the firm. CSFB was also able to pitch the financing package a week ahead of schedule after Warburg Pincus wanted to more immediately seize positive market conditions, he added. Warburg Pincus selected the lead banks because the firm has a good relationship with the lenders. "[They're] all good friends that we trust," Neary noted. There were close to 90 names in the bank book with $1.5 billion in initial commitments, he said.
The $395 million credit facility includes a six-year, $295 million "B" loan priced at LIBOR plus 3%, tied to a leverage-based grid that can push pricing as low as LIBOR plus 23/4%, Neary said. He explained that the loan flexed down from LIBOR plus 33/4% and was decreased from $365 million. The revolver was increased from the original size of $80 million to $100 million, he added. The revolver is undrawn. The notes portion of the deal was increased from $300 million to $400 million and has an eight-year term, non-call for three years. Lee said it would usually be non-call for four years, so the private equity firm was pleased with the better terms.
TransDigm, a Richmond Heights, Ohio-based supplier of proprietary aerospace components, was a known credit in the market before the Warburg Pincus transaction, Lee said, explaining that the company had been bought out twice before. "And in each instance it performed well," he said, adding that TransDigm is highly cash generative. Cash flow has increased progressively and TransDigm has a strong management team, Lee added. "We had a great company in a good market," Neary said. Warburg Pincus purchased TransDigm from Odyssey Investment Partners for about $1.2 billion.