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IMG Said to Increase Rate on $2.35 Billion Buyout Term Loan

March 13 (Bloomberg) -- IMG Worldwide Inc., which manages athletes from Eli and Peyton Manning to Venus Williams, is offering pay lenders a higher interest rate on loans backing its buyout by Silver Lake Management LLC after initially seeking below-market rates.

A $1.9 billion first-lien loan that is due in seven years will pay interest at 4 percentage points to 4.25 percentage points more than the London interbank offered rate, compared with 3.25 percentage point to 3.5 percentage points initially offered, according to a person with knowledge of the deal, who asked not to be identified without authorization to speak publicly.

IMG, which traces its roots to a handshake between its founder Mark McCormack and golf legend Arnold Palmer in 1960, increased rates to levels comparable to the average yield of similar loans, according to data compiled by Bloomberg. The New York-based company is being purchased by William Morris Endeavor Entertainment LLC and its investor Silver Lake for about $2.4 billion.

A $450 million, eight-year junior loan will pay interest at 7.25 percentage points more than Libor, compared with 6.75 percentage points, the person said. Both loans have a 1 percent minimum on the lending benchmark and are being offered at 99 cents on the dollar. A discount to par increases yield for investors and reduces proceeds for the company.

Commitment Deadline

Christian Muirhead, a spokesman for William Morris, didn’t return a telephone call seeking comment on the change in loan rates. The group is purchasing the company from Forstmann Little & Co., which bought IMG in 2004.

The debt is being arranged by JPMorgan Chase & Co. and commitments were due by 5 p.m. today in New York, according to the person.

Moody’s Investors Service assigned a B2 corporate family rating, five levels below investment grade, to IMG, according to a Feb. 26 report. The combined entity is expected to have a ratio of earnings to cash flow that exceeds 7 times, and a failure to achieve cost savings or revenue growth may lead to a ratings cut, Moody’s analyst Scott Van den Bosh wrote in the report.

Proceeds from the term loans, which are expected to be covenant-light, along with $461 million of new equity will be used to fund the transaction and refinance debt, according to Moody’s.

The average yield of first-lien institutional loans rated single B by Moody’s that mature in about seven years is 4.94 percent, Bloomberg data show.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net

To contact the editors responsible for this story: Faris Khan at fkhan33@bloomberg.net Chapin Wright

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