Bain Capital LLC, a Boston-based leveraged-buyout firm, asked banks to finance its bid for Priory Group Ltd., an operator of mental-health and addiction clinics whose clients have included Kate Moss and Susan Boyle.
Bain spoke to banks including JPMorgan Chase & Co. and Morgan Stanley about the deal, which will include a high-yield bond, according to four people familiar with the matter. Bank of America Corp. and Priory’s owner, Royal Bank of Scotland Group Plc, are also negotiating roles, said three of the people, who declined to be identified because the talks are private.
Leveraged-buyout companies announced $51 billion of acquisitions Europe this year, compared with $15 billion a year earlier, according to data compiled by Bloomberg. LBO debt is raised in the name of the target company and repaid with its cash flow, triggering a fall in its credit rating to junk.
“There is improved interest” in LBO debt, “albeit more on a name-by-name basis versus the carte-blanche approach of a few years back,” said Jonathan Moore, a high-yield analyst at Evolution Securities Ltd. in London.
Bain is the frontrunner to buy Priory after RBS’s talks with other private-equity firms including Cinven Ltd., Advent International Corp. and Blackstone Group LP failed. Priory attracted offers of less than 1 billion pounds ($1.6 billion), though Edinburgh-based RBS had been seeking about 1.1 billion pounds, people familiar with the matter said in September.
RBS inherited Priory, which has treated celebrities including supermodel Moss and singer Boyle, from ABN Amro Holding NV when it bought the Dutch bank in 2007. The lender is reducing its balance sheet by selling assets including bank branches and its credit-card payment processing unit after needing the world’s biggest bank bailout during the credit crisis.
ABN Amro purchased Priory from London private-equity firm Doughty Hanson & Co. in 2005.