Dubai World’s investment unit Istithmar World PJSC is arranging as much as $350 million of loans to attract bidders to its Inchcape Shipping Services, two people familiar with the matter said.
The so-called staple financing will be available for any bidder for Inchcape Shipping and comprises senior leveraged loans and junior debt due in about six and eight years, said the people, who declined to be identified because the information is private.
Bank of America Merrill Lynch and Royal Bank of Scotland Group Plc are arranging the financing, the people said.
A spokesman for Dubai World, who declined to be identified citing company policy, wouldn’t comment on the transaction. RBS spokeswoman Claire Gorman and a London-based spokeswoman for Bank of America also declined to comment.
Istithmar is selling Inchcape Shipping after the U.K.-based transport company more than doubled earnings before interest, taxes, depreciation and amortization to about $70 million last year. Inchcape Shipping, which traces its origins to 1847 in Calcutta, provides port, marine and cargo outsourcing services in 50 countries.
Loans to the company would represent five times its Ebitda, higher than the average ratio for leveraged buyout targets in Europe of 4.7 times, according to Fitch Ratings. In an LBO, private equity firms pay for an acquisition by loading a target company with debt and using its cash flow to repay lenders.
Dubai World, which separately is seeking to restructure $24.8 billion of debt, is one of the emirate’s three main state-owned holding companies.