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Carlyle’s Loan for Acosta LBO Said to Get More Expensive

Acosta Sales & Marketing increased the interest rate it will pay for a $2.07 billion loan backing its buyout by Carlyle Group LP as investors push for more yield following the biggest retreat from such speculative-grade corporate debt in three years.

The marketer of consumer packaged-goods companies is offering as much as 4 percentage points more than lending benchmarks, up from an earlier proposed margin of 3.5 percentage points to 3.75 percentage points, according to a person with knowledge of the financing, who asked not to be identified because the information isn’t public.

Acosta joins at least 10 other issuers in raising rates this week to get deals done in the leveraged-loan market amid sagging demand for the debt, according to data compiled by Bloomberg. Investors pulled $1.5 billion from U.S. loan funds in the week ended Aug. 6, the biggest weekly withdrawal since August 2011, while junk-bond funds had a record $7.1 billion outflow, according to data provider Lipper.

Just last month, Advantage Sales & Marketing LLC, a competitor with similar junk ratings to Acosta, was able to get cheaper financing for its buyout by private-equity firms Leonard Green & Partners and CVC Capital Partners.

Advantage’s $1.8 billion term loan priced at 3.25 percentage points more than lending benchmarks in July, Bloomberg data show. The debt was sold to investors at a discount of 99.75 cents on the dollar, the data show.

Offering Discount

Acosta is selling its buyout loan for 99 cents on the dollar, compared with the 99 cents to 99.5 cents initially offered to investors, the person said.

The takeover will be financed with almost $3 billion of debt plus $1.84 billion of equity from Carlyle, according to an Aug. 8 report from Moody’s Investors Service. The funding includes $800 million of junior capital and a $225 million revolving credit line, according to an Aug. 6 report by Standard & Poor’s.

The buyout financing will increase Jacksonville, Florida-based Acosta’s leverage to “well above” eight times earnings before interest, taxes, depreciation and amortization, Moody’s said.

The company is rated B2 by Moody’s and B by S&P, or five levels below investment-grade.

Elevated Risks

“Acosta, post the Carlyle acquisition, faces elevated risks, given the strictures posed by higher leverage as the company executes expansion plans and integrates acquisitions,” Moody’s said in the Aug. 8 report.

Carlyle, a Washington-based buyout firm, is expected to complete its purchase of Acosta from Boston-based private-equity firm Thomas H. Lee Partners LP by the end of September, according to a company statement last month.

Debt financing for private-equity firm GTCR LLC’s $480 million purchase of Cole-Parmer Instrument Co. from Thermo Fisher Scientific Inc. will also be more expensive.

The maker of laboratory equipment boosted the proposed interest rate margin on its $240 million term loan by 0.75 percentage point to 4.5 percentage points more than lending benchmarks, according to a person with knowledge of the financing. The spread on a $107 million second-lien loan backing the buyout widened to 7.5 percentage points from 7 percentage points, said the person, who wasn’t authorized to speak publicly.

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