DaVita Inc., a provider of kidney dialysis care, cut the interest rate on an $1.65 billion term loan it’s seeking to finance the acquisition of Healthcare Partners, according to a person with knowledge of the transaction.
The seven-year debt will now pay interest at 3 percentage points more than the London interbank offered rate, down from a range of 3.25 percentage points to 3.5 percentage points, said the person, who asked not to be identified because the terms are private. The minimum on the lending benchmark will remain at one percent.
DaVita is proposing to sell the loan at 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.
Lenders are being offered one-year soft-call protection of 101 cents, meaning the Denver-based company would have to pay one cent more than face value to refinance the debt during the first year, the person said.
JPMorgan Chase & Co. is arranging the financing which also includes a $1.35 billion term loan A which will pay interest at 2.5 percentage points more than Libor, according to data compiled by Bloomberg.
The debt is rated Ba2 by Moody’s Investors Service and BB-by Standard & Poor’s and is expected to be distributed to investors tomorrow, the person said.
“The company is excited that debt investors showed strong support for financing its acquisition of HealthCare Partners,” Skip Thurman, a DaVita spokesman, said in an e-mailed statement.
DaVita, whose biggest shareholder is billionaire Warren Buffett’s Berkshire Hathaway Inc., will pay about $3.66 billion in cash, plus 9.38 million shares of its stock to acquire HealthCare Partners, the companies said in a joint statement on May 21 distributed by Business Wire.
The transaction is expected to close early in the fourth quarter and the combined entity will be known as DaVita HealthCare Partners Inc., the companies said.
Peter Grauer, the chairman of Bloomberg LP, the parent company of Bloomberg News, has served on DaVita’s board of directors since 1994.
A term loan A is sold primarily to banks, while so-called B loans are mainly bought by non-bank lenders such as collateralized loan obligations, mutual funds and hedge funds.