Charles River Laboratories International Inc.., a provider of drug-testing services, plans to use $1.25 billion in bank loans to finance its WuXi PharmaTech (Cayman) Inc. acquisition.
JPMorgan Chase & Co. committed to provide $687.5 million portion of the loan and Bank of America Corp. will finance the remaining $562.5 million, Wilmington, Massachusetts-based Charles River said yesterday in a regulatory filing.
The two banks intend to syndicate the loan to additional financial institutions in consultation with Charles River, according to the filing.
The $1.6 billion transaction is the largest foreign takeover of a Chinese company. It would give Charles River testing facilities in Shanghai, Suzhou and Tianjin in China, where cheaper labor and laboratory costs are luring the world’s biggest drugmakers in search of new blockbuster medicines.
Charles River will borrow $1 billion in a term loan, as much as $170 million of which will be available in euros, and a $250 million revolving credit line, with as much as $150 million available in euros, according to a commitment letter attached to the filing. Both loans will mature in five years.
The company will repay 5 percent of the term loan during the first year; 10 percent, 15 percent and 20 percent in years two through four, according to the letter. The rest will be due during the last year.
Under the proposed terms, Charles River will pay lenders an interest rate 2 percentage points to 2.75 percentage points more than the London interbank offered rate. Banks will also get a commitment fee ranging from 0.25 percent to 0.5 percent on the revolving portion of the loan, according to the letter.
The margin over Libor, the rate banks charge to lend to each other, and the commitment fee will depend on the company’s leverage ratio, the letter shows. Charles River’s debt to earnings before interest, taxes, depreciation and amortization will be capped at 3.5 times after the transaction, according to the letter.
To contact the reporter on this story: Emre Peker in New York at email@example.com.