Advanced Medical Optics has secured a $135 million credit facility and issued $200 million in notes in order to complete its spin-off from Allergan. The financing was set up through the new Santa Ana, Calif., company rather than through its former parent so that Advanced Medical would not have too many inter-company relationships, according to Richard Meier, cfo. Setting up the financing this way also provided Advanced Medical with the opportunity to prove to the marketplace that it was a sound, stand-alone company, he explained.
The new credit includes a five-year, $35 million revolver and a six-year, $100 million "B" term loan. The term loan is priced at LIBOR plus 31/ 4%, and the revolver is priced similarly off a leveraged-based grid. The $200 million in eight-year notes have a coupon of 91/ 4%. Meier noted that the company was able to take advantage of a fairly steep yield curve and, through interest-rate swaps on both the fixed-rate and floating-rate debt, effectively shave 200 basis points off its overall interest costs.
A portion of the proceeds was used to fund the transfer of roughly $265 million in medical device assets to Advanced Medical, Meier said. Going forward, the company has an undrawn revolver and almost $30 million in cash on its balance sheet, he noted.
The process for securing the new financing began at the end of 2001, when Allergan started talking to its existing relationship banks. Bank of America and Merrill Lynch lead the deal, but ABN Amro stepped up to the plate to play an important role, aiding the company with services, including its letters of credit and facility leases, Meier said.