Acelity Launches $1.75B 2nd-Lien High Yield Bond Offering

acelity logoAcelity has launched a $1.75 billion offering of second-lien secured notes under the issuing entities Kinetic Concepts Inc. and KCI USA. Goldman Sachs (left), Bank of America Merrill Lynch, Credit Suisse, Nomura, SunTrust Robinson Humphrey, RBC, and UBS are bookrunners on the five-year (non-call two) paper. A roadshow will run from tomorrow, for pricing next Tuesday.

Proceeds will be used, together with those from an equity contribution and cash on hand, to redeem in full the borrower’s outstanding second-lien notes. As of June 30, 2016, there was $1.75 billion of outstanding second-lien paper, paying 10.5% and maturing 2018. These notes will be taken out at 105.25.

The equity contribution will be for up to $100 million, after the firm’s parent entered into a subscription agreement under which the sponsors will purchase equity in the partnership on a pro-rata basis for an aggregate purchase price of $100 million.

The company has also launched a private offer to exchange up to $450 million of its unsecured notes for new 12.5% limited third-lien secured notes due 2021. It is also soliciting consents for a number of proposed amendments to the unsecured indenture that include amending the reporting covenant.

No indication of likely ratings has been offered for the second-lien notes by the banks, but the borrower’s outstanding 2018 second-lien notes are rated B-/Caa1.

The company was last in the bond market in June, with an add-on to its 7.875% secured notes due 2021. Prior to that it allocated a $1.707 billion extended F term loan due November 2020.

The new second-lien notes will become the company’s longest-dated outstanding bonds. Other issues on its curve include the 12.5% unsecured notes due 2019, and 7.875% first-lien notes due 2021. These closed on Friday at 101.625 yielding 11%, and 107.875 yielding 4.8%, respectively, according to S&P Global Market Intelligence.

Acelity is a medical device company. Its sponsors are Apax, CPPIB, and PSP Investments. — Luke Millar

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