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RAC Said to Seek 260 Million-Pound Loan for Carlyle Dividend

RAC Ltd. is seeking a 260 million-pound ($421 million) loan to pay a dividend to its private-equity owner Carlyle Group LP, according to a person with direct knowledge of the deal.

The U.K. roadside-recovery company is offering to pay an interest margin of 550 basis points more than the London interbank offered rate for the seven-year debt, said the person, who asked not to be identified because the negotiations are private. The deal will be offered to investors this week.

RAC is also seeking to amend the terms of its existing senior facility and is offering to boost the interest margin on a term loan B by 25 basis points to 500 basis points, the person said. A basis point is 0.01 percentage point.

About 25 percent of the company’s original 620 million-pound loan facility has been repaid or canceled since the Washington-based buyout firm agreed to buy RAC in June last year, the person said, giving the company a leverage ratio of about 2.8 times earnings before interest, tax, depreciation and amortization in September. Ebitda is expected to be about 128 million pounds in 2012 and revenue will increase to more than 460 million pounds, said the person.

BNP Paribas SA, Credit Suisse Group AG, JPMorgan Chase & Co., Morgan Stanley and UBS AG arranged Carlyle’s buyout loans last year, according to data compiled by Bloomberg. The facility consisted of a 520 million-pound term loan B, a 50 million-pound revolving credit and a 50 million-pound capital expenditure portion. Term loan Bs are sold mainly to non-bank investors such as collateralized loan obligations, bank loan mutual funds and hedge funds. Under a revolver, money can be borrowed again once it’s repaid.

Catherine Armstrong, a spokeswoman for Carlyle in London, declined to comment.

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