U.S. Markets closed

Carlyle to raise USD2.4-2.5bn debt for Illinois deal

By Natalie Harrison

NEW YORK, Feb 7 (IFR) - Private equity group Carlyle is expected to fund its acquisition of Illinois Tool Works Inc's industrial packaging unit with around USD2.4bn-USD2.5bn of debt, according to market sources.

Leverage is expected to be in the region of 6.75 times Ebitda, and the majority of the debt will be raised in the leveraged loan market, one of the sources said.

The debt is expected to be split between around USD1.6bn-1.7bn of secured first-lien leveraged loans and around USD800-900m in unsecured high-yield bonds. Leverage on the loans is around 4.5 times Ebitda.

"It's a great deal," said another source.

"The company has been disposing of assets and focusing on its core business. It gives the sponsor the opportunity to come in and refocus the enterprise and give managers new incentive."

Carlyle said late on Thursday that it had agreed to buy the business for USD3.2bn, and had secured committed debt financing from JP Morgan Chase, Goldman Sachs, Bank of America Merrill Lynch, Barclays, Citigroup and Credit Suisse.

Goldman Sachs and JP Morgan are the quarterbacks for the financing, the sources said.

The timing of the deal is not yet certain, but it could come to market as soon as late March. Syndication of the bridge loan is expected to get under way soon.

The remainder of the financing will come in the form of equity from the private equity group's USD13bn Carlyle Partners VI buyout fund.

Leveraged finance bankers are hoping that a pick-up in mergers and acquisitions will help bolster fees in 2014.

The issue is even more crucial this year amid expectations that high-yield bond supply will drop by at least 10% as fewer companies refinance their debt.

Bankers expect more strategic acquisitions as corporates potentially spin-off non-core assets, but are less optimistic about leveraged buyouts increasing.

"I wouldn't say that spin-offs like this are a trend, but there is bound to be more," said one of the sources.