Merrill Lynch and Bank of America are launching bank and bond deals for Advance Medical Optics (AMO) this week to facilitate the spin-off of the business from Allergan. AMO is an opthalmic surgical and contact-lens care business, and the spin-off will leave Allergan as a pure-play specialty pharmaceutical company, explained a buysider. The bank deal is said to be split between a $100 million "B" loan and a $40 million revolver, while $175 million of senior subordinated notes will be offered, she said. Ratings are said to be B1 and BB- for the bank debt and B3 for the senior sub notes. Pricing on the five-year revolver is LIBOR plus 3% and the "B" is offering LIBOR plus 31/ 2%, said a banker, who noted launch is slated for June 4.
The one-time costs of the spinoff will be $150 million to $200 million, but the expectation is both Allergan and AMO will be able to grow more effectively apart. A banker said, the company has a good market position and a steady business. There will be a low level of senior leverage--1.5 times--and total will be in the high 3s, he said. Low capital expenditure and strong cash flow should enable quick de-leveraging, he added.