Acromas, jointly owned by buyout firms Charterhouse Capital Partners, CVC Capital Partners, and Permira, is refinancing its £4 billion ($6.2 billion; €4.75 billion) of existing debt by dividing the company into two separate entities. The bulk of Acromas’ debt pile will be left with roadside assistance group the AA, allowing Saga to undertake an IPO with a much lighter debt burden.
It is believed that approximately 10 banks are working on the deal, which will reportedly see £2.5 billion of underwritten bridge loans will be sold to the bond market as whole-business securitisation (WBS) bonds, where they are expected to gain up to a 30-year maturity.
Acromas was formed in 2007 through a £6.2 billion merger of the AA and Saga.
The banks leading the WBS issue are: Deutsche Bank, RBS, Barclays and Mizuho. Each was left holding Acromas debt for the past six years having failed to syndicate it following the merger of the AA and Saga.
Other banks close to the deal include Bank of America Merrill Lynch, Bank of Tokyo-Mitsubishi, HSBC, Lloyds, RBC and UBS, according to Reuters.
A smaller segment of the debt will be paid down following a high yield bonds issue by The AA. Subsequently, The AA’s debt will be cheaper to service compared with a leveraged refinancing – the loan will have an interest margin of around 250bp that will step up over time.
The firm’s turnover for the first six months of the 2012/13 financial year was up 8.3 percent, with EBITDA up 1.3 percent compared to the first half of 2011/12.
“Our improved cash generation has helped reduce our net bank debt to £4 billion – the lowest since the business was founded,” Andrew Goodsell, chief executive of Acromas said in the firm’s most recent financial statement.