abcs 1.6bn loan to cost more

Reuters

A $1.62 billion ($US1.5 billion) loan for Australian childcare firm ABC Learning Centres Ltd will be repriced upwards after a sale of a 60 per cent stake its US businesses to Morgan Stanley Private Equity, sources said.

Lenders are unlikely to demand the loan be refinanced or paid out under change of control rights in the loan documentation, the sources said. The margin on the loan was 80 basis points over BBSY based on 2-2.5 times leverage at the time of signing.

The loan was arranged by Australia & New Zealand Banking Corp, Commonwealth Bank of Australia, nabCapital and Westpac Banking Corp.

The banks have to approve the sale to Morgan Stanley Private Equity and this approval is likely to be contingent on getting a higher margin for the loan.

The deal divides into a $1.5 billion syndicated three-term bullet term loan, a $60 million working capital facility solely provided by Westpac and a $60 million letter of credit facility with CBA and Westpac each lending $30 million.

The lenders to the $1.5 billion term loan were ANZ with $250 million, CBA with $250 million, Westpac with $250 million, nabCapital with $200 million, Mizuho Corporate Bank with $150 million, Bank West with $100 million, Bank of America with $75 million and Citigroup with $75 million.

The loan is to refinance an existing CBA and Westpac-arranged $1 billion 364-day bridging loan that closed in September, as well as to provide extra headroom for general corporate purposes.

ABC Learning's shares fell nearly 70 per cent on February 26 on investor concerns about its profits and debt profile and on market talk that its founder had been forced to sell shares.

ABC Learning reiterated on March 5 it was not in breach of any covenants on the $1.62 billion loan. The covenants relate to shareholder funds, funding ratios and gearing ratios.

Under the sale, Morgan Stanley Private Equity will subscribe to senior convertible notes, giving it an option of acquiring 10 per cent of ABC's fully diluted equity.

The deal valued the whole of the group's US business at $US775 million, compared with about $US700 million ABC had paid to acquire the assets.

ABC Learning's two other major shareholders are Singapore state investment firm Temasek Holdings Pte Ltd, which last week raised its stake to 14.7 per cent, and Lazard Asset Management with a 13.9 per cent interest