Banks have kicked off a €4.7 billion-equivalent leveraged-loan deal for Bain Capital LP’s acquisition of a controlling stake in Volkswagen AG’s heavy diesel-engine unit. The financing involves €2.35 billion loans in both euros and dollars, according to a person familiar. Initial price talk is margins 3.5 and 3.75 percentage points above respective benchmarks, offered at 99.5% of face value.
The offering adds to a flurry of leveraged-buyout financings amid rising borrowing costs. A third of September’s US leveraged-loan launches by dollar amount involved acquisitions. Bain Capital agreed in June to buy a 51% stake in Everllence, expected to generate about €7.4 billion for Volkswagen. Private equity firms have shown increased appetite for industrials assets.
Volkswagen’s move is part of restructuring to boost profitability amid a downturn in China. Moody’s Ratings assigned the loan a B1 rating, four steps below investment grade. Everllence’s leverage is seen at 6.4 times earnings, with higher financing costs providing limited headroom. Investors have until Oct. 13 to place orders. Barclays Plc and Goldman Sachs Group Inc. are among bookrunners.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing