The $1.15 billion credit backing Medco Health Solutions' spin off from parent Merck & Co. received a warm pro-rata reception last week. Lenders did not hesitate to grab a piece of the new money, oversubscribing to the "A" loan and revolver pieces, according to a banker familiar with the deal. J.P. Morgan, Goldman Sachs and Citigroup are leading the credit.
The banker said from a bank perspective, it is a good idea to join the credit. "[It is] the first facility for a new company," he said, noting that banks want to plant their feet in a relationship with Medco from the start. Merck is spinning off the pharmacy benefit management unit to shareholders. A Goldman official declined comment and Citi and J.P. Morgan officials did not return calls by press time.
The credit includes a $350 million "A" loan and a $250 million revolver, both priced at LIBOR plus 2%. There is also a $550 million "B" term loan priced at LIBOR plus 21/4%. The banker said the "B" piece had been fully subscribed as of late last week, following the Tuesday meeting. He did not cite specific lenders to any of the tranches. Merck had originally planned to spin off Medco last year through an initial public offering, but the IPO was postponed due to poor market conditions and concerns over Medco's accounting practices. An official at Franklin Lakes, N.J.-based Medco could not be reached by press time.