Medline marketing US$7b of loans to fund jumbo buyout by group including GIC: source

[NEW YORK] Banks launched a US$7 billion loan sale on Wednesday to help fund the leveraged buyout (LBO) of medical supply company Medline Industries, the largest since the global financial crisis.

Medline's buyout, led by a group of private equity firms, marks a return of large-scale LBOs amid historically low borrowing costs that are helping to fuel activity.

Sponsors have also been making up for lost time after the coronavirus pandemic temporarily halted acquisition dealmaking. Investors have been expecting a flood of acquisition financings this month.

As much as US$110 billion of US high-yield bond and leveraged loan sales are predicted to hit the market in September, according to bankers polled by Bloomberg, which would make it one of the busiest months in years.

A hunt for higher yields amid rock-bottom rates elsewhere is helping underpin demand for the risky debt.

Medline will hold a lender call for the leveraged loan, one of the largest seen in the past decade, on Monday at 11am in New York, according to a person with knowledge of the matter.

Bank of America is leading the deal, which is comprised of a US$6 billion dollar-denominated tranche and a US$1 billion dollar-equivalent euro component that both mature in seven years, said the person, who asked not to be identified because the deal is private.

A US$7.8 billion high-yield bond offering is also expected to formally launch in the coming weeks. A group of banks providing the financing sold the bridge loans backing the bonds to investors in August.

During the bridge syndication, Medline marketed the deal with leverage - a key multiple comparing earnings to debt - of 4.4 times on a net secured basis, and at about 6.1 times on a net total basis.

That was based on adjusted earnings before interest, taxes, depreciation and amortisation of US$2.37 billion, total secured debt expected at US$10.8 billion and total debt of US$14.8 billion, with US$300 million of cash on the balance sheet, Bloomberg previously reported.

Private equity firms Blackstone Group, Carlyle Group and Hellman & Friedman LLC are buying a majority of Medline for more than US$30 billion from the Chicago-based Mills family. Singapore's GIC will also invest as part of the partnership.

The deal is worth as much as US$34 billion including debt and would include a US$17 billion so-called equity check, Bloomberg previously reported.

BLOOMBERG