Fresenius to launch $2.5 billion of pro rata bank debt Thursday

By Sara Rosenberg

New York, June 20 - Fresenius Medical Care AG is scheduled to hold a bank meeting on Thursday to launch the $2.5 billion pro rata portion of its $5 billion senior credit facility, according to a market source.

Bank of America and Deutsche Bank are the lead banks on the deal, with Bank of America the left lead.

The pro rata piece consists of a $1 billion revolving credit facility and a $1.5 billion five-year term loan A, with both tranches talked at Libor plus 150 basis points, the source said.

Fresenius' proposed $2.5 billion seven-year term loan B is not expected to launch until the Fall, the source added.

Although the pro rata bank meeting is taking place in Germany, the deal is being marketed primarily to U.S. investors with some European players potentially participating as well, the source explained.

Proceeds from the $5 billion credit facility will be used to finance the acquisition of Renal Care Group Inc. for about $3.5 billion, plus the assumption of about $500 million of Renal debt.

In addition to funding the acquisition, Fresenius will also use the new loan to replace its existing $1.2 billion credit agreement.

At closing, debt to EBITDA will be a little over 4x, but the company hopes to bring that multiple down to 21/2x to 3x over the next two to three years.

Under the acquisition agreement, Fresenius will pay $48.00 per Renal share in cash. The transaction, which is expected to close in the second half of the year, is subject to Renal Care shareholder approval and other customary closing conditions, including Hart-Scott Rodino.

Fresenius is a Bad Homburg, Germany-based dialysis products and services provider. Renal Care is a Nashville, Tenn.-based dialysis service provider.

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