Bank of New York Co. and Donaldson, Lufkin & Jenrette Securities Corp. are co-arranging a $1 billion leveraged financing for Total Renal Care Holdings Inc. that features a bond and loan hybrid structure.
Bank of New York is also acting as administrative agent, and Donaldson Lufkin Jenrette is syndication agent for the loan to Torrance, Calif.-based Total Renal Care.
The company sells integrated dialysis services to patients suffering from chronic kidney failure, and it operates laboratory and pharmacy facilities in the United States and United Kingdom.
The credit facility, split between an $800 million revolving facility and a $200 million term loan, replaces a $400 million revolver both banks arranged for Total Renal Care last year, according to Eric Swanson, managing director and a co-head of the loan syndicate group at Donaldson Lufkin Jenrette.
DLJ is a shareholder of Total Renal Care through DLJ Merchant Banking Partners Inc., a unit, and managed the California company's initial public offering in 1995.
Total Renal Care has been aggressively expanding, signing four definitive merger agreements and nine agreements in principle since July 1, according to company statements.
Similar to previous DLJ hybrid deals for Pioneer Americas and Playtex Inc., the $200 million term loan facility has no financial performance covenants and will be priced only after the deal is presented to investors.
"We're going to the market with a range of spreads over" the London interbank offered rate, Mr. Swanson said, "and we'll judge demand and price it kind of like a bond."
Initial pricing on the term loan will probably fall between 150 and 170 basis points over Libor, while pricing on the revolver will be tied to the borrower's leverage ratio and start at 125 basis points over Libor, said Mr. Swanson.
"Buyers of this paper are getting comfortable that, the way we structured it - despite the fact that it's very flexible from a covenant perspective - it still has all the protections that they need," said Mr. Swanson.
The deal was launched last Thursday, and commitments are due Sept. 26.
Separately, Merrill Lynch & Co. and J.P. Morgan & Co. are expected to bring a new financing for BellSouth Corp. and Safra Group to market in early October, according to market sources.
The deal is not completed but is expected to include a leveraged loan of about $1.25 billion and a high-yield bond issue.
Atlanta-based BellSouth is a communications services company operating in 20 countries. The financing will fund the development of wireless phone systems in Brazil.