UBS Warburg is launching this week syndication of a $635 million bank deal for Zurich-based Centerpulse, formerly Sulzer Medica, funding the settlement of a U.S. class action suit taken by individuals affected by defective hip and knee implants. The bank debt is likely to consist of a $300 million, two-year "A" loan and a $335 million, five-year institutional piece. Both tranches will comprise U.S. and European debt, but the exact split could not be confirmed. Officials at Centerpulse in Zurich could not be reached by press time and a UBS banker declined comment.
A bank meeting will be held in New York tomorrow with another in Europe later this week. The deal is anticipated to receive mid-to-high four-B ratings because the company has no significant debt and strong excess cash flow, said a banker familiar with the deal. One buysider described the deal as interesting due to the defective products and the litigation. But, the banker said the problems are well behind the company. Furthermore, both the buysider and the banker stated the company is a strong business without prior leverage. Centerpulse will pay in total $725 million into the settlement fund. There will also be a tradable preemptive rights offering of $165 million to make the difference. The debt funding will be subject to the completion of the rights issue. Credit statistics could not be ascertained.