Carlyle Cuts Rate on $3.22 Billion of Loans for DuPont Unit

Carlyle Group LP (CG) cut the interest rate it will pay on a $3.22 billion of loans the private-equity firm is seeking to back its purchase of DuPont Co. (DD)’s auto-paint unit, according to a person with knowledge of the transaction.

A $2.3 billion seven-year term loan will now pay interest at 3.75 percentage points more than the London interbank offered rate, down from 4.25 percentage points, said the person, who asked not to be identified because the information is private. The Libor floor remains unchanged at 1.25 percent.

A seven-year euro-denominated term portion was increased to 390 million euros ($522 million) from 150 million euros and will now pay interest at 4 percentage points more than Libor, with a 1.25 percent floor and is expected to be sold at 99.5 cents on the dollar.

Carlyle Group, the world’s second-largest private-equity firm, is acquiring DuPont Performance Coatings for $4.9 billion in a deal poised to be the largest buyout financing raised in the U.S. since Kinetic Concepts Inc. obtained a $2.45 billion loan in November 2011 for its purchase by Apax Partners Inc., Bloomberg data show.

The dollar-denominated debt is expected to be sold at 99.5 cents on the dollar, compared with 99 cents initially offered, the person said, increasing proceeds for the company and reducing the yield to investors.

Call Protection

Term-loan lenders are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, said the person.

Both term portions will be covenant-lite, meaning the debt won’t carry typical lender protection such as financial- maintenance requirements.

The deal also includes a $400 million, five-year revolving line of credit that will now pay interest at 3.75 percentage points more than Libor, compared with 4 percentage points initially offered, according to the person. Lenders are being offered a 100 basis-point fee being paid up-front. A basis point is 0.01 percentage points. Funds under the revolver can be obtained in more than one currency.

Barclays Plc, Citigroup Inc., Deutsche Bank AG, Credit Suisse Group AG, Morgan Stanley, UBS AG, Jefferies Group Inc. and Sumitomo Mitsui Banking Corp. are arranging the debt, according to data compiled by Bloomberg. Commitments are due Jan. 15 at 5 p.m. in New York on the dollar-denominated term loan, while commitments on the euro piece are due Jan. 16.

Notes Sale

Leverage, or debt to earnings before interest, taxes, depreciation and amortization, will be 4.5 times on a senior secured basis and 5.6 times total, the data show. The debt is rated B1 by Moody’s Investors Service and B+ by Standard & Poor’s.

More than $637 billion of loans were obtained by speculative-grade rated companies in the U.S. in 2012, surpassing levels from the previous year by about 8 percent, according to Bloomberg data.

Dupont Performance Coatings is also seeking 250 million euros of secured notes as well as $750 million of senior unsecured notes, which are expected to price toward the middle of this week, the data show.

Carlyle is expected to complete the transaction with Wilmington, Delaware-based DuPont during the first quarter, according to an Aug. 30 company statement.

Randall Whitestone, a spokesman for Carlyle Group, didn’t immediately respond to an e-mail seeking comment.

Blackstone Group LP is the world’s largest private-equity firm.

To contact the reporter on this story: Michael Amato in New York at mamato3@bloomberg.net

To contact the editor responsible for this story: Chapin Wright at cwright4@bloomberg.net

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