Varian Medical closes on $500 million term loan, $300 million revolver

By Marisa Wong

Madison, Wis., Aug. 28 - Varian Medical Systems, Inc. entered into a credit agreement on Aug. 27 for a $500 million term loan facility and a $300 million revolving credit facility, both due Aug. 27, 2018, according to an 8-K filed Wednesday with the Securities and Exchange Commission.

The company's board of directors authorized the syndication of the new senior credit facility on July 24, as previously reported.

Bank of America, NA is the administrative agent, swingline lender and letter-of-credit issuer for the new loans. Merrill Lynch, Pierce, Fenner & Smith Inc., Sumitomo Mitsui Banking Corp. and Wells Fargo Bank, NA are joint lead arrangers.

Merrill Lynch is the bookrunner, and Sumitomo and Wells Fargo are co-syndication agents and co-documentation agents.

The revolving credit facility includes a $50 million subfacility for the issuance of letters of credit and permits swingline loans of up to $25 million.

The company is allowed to make up to two requests to increase total commitments under the term loan by an aggregate amount of up to $100 million and up to three requests to increase total commitments under the revolver by an aggregate amount of up to $200 million.

The new credit facility replaces Varian's prior credit facility dated April 27, 2012, which provided for a $300 million revolver. Upon closing of the new facility, the company repaid in full the $148 million outstanding balance and terminated the old revolver.

At closing the company borrowed $500 million under the term loan.

Interest for the term loan is equal to Libor plus a margin of 100 basis points to 125 bps based on a leverage ratio involving funded indebtedness and EBITDA. Borrowings under the revolver accrue interest at Libor plus 125 bps to 150 bps, depending on the leverage ratio.

The commitment fee on the unused portion of the revolver ranges from 15 bps to 27.5 bps, depending on the leverage ratio.

The new facility's covenants are similar to those of the old revolver.

In addition, the company has agreed to maintain some financial covenants, including a maximum consolidated leverage ratio and a minimum cash flow coverage ratio.

Proceeds will be used for working capital, capital expenditures, share repurchases, acquisitions and other corporate purposes, as well as to pay down the prior credit facility.

Based in Palo Alto, Calif., Varian creates cancer treatment technology.

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