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USI Insurance Said to Set Final Terms on $1.03 Billion LBO Loan

Dec. 14 (Bloomberg) -- USI Insurance Services LLC set the final terms on a $1.03 billion covenant-lite term loan B backing its buyout by Onex Corp., according to a person with knowledge of the transaction.

The seven-year debt will pay interest at 4 percentage points more than the London interbank offered rate, with a 1.25 percent floor, said the person, who asked not to be identified because the information is private.

The interest rate will decline to 3.75 percentage points more than Libor when leverage, or the ratio of debt to earnings before interest, taxes, depreciation and amortization, is at 6.25 times total, the person said.

The loan will be sold at 99.5 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

The interest on the loan will increase if USI sells incremental debt at a higher yield, said the person. Under a so-called most-favored-nation clause, the spread on the financing may be increased by as much as 50 basis points. A basis point is 0.01 percentage point.

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, the person said.

Bank of America Corp., Morgan Stanley, Citigroup Inc., Goldman Sachs Group Inc., Royal Bank of Canada and UBS AG are arranging the financing and commitments are due today by 11 a.m. in New York, with allocations expected after that, person said.

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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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