Carlyle Sets Rate on $2.9 Billion of Loans for DuPont Unit

Carlyle Group LP, the world’s second-largest private-equity firm, set the interest rate it will pay on $2.9 billion of loans it’s seeking to back its purchase of DuPont Co.’s auto-paint unit, according to a person with knowledge of the transaction.

A $2.3 billion seven-year term loan will pay interest at 4.25 percentage points more than the London interbank offered rate, said the person, who asked not to be identified because the information is private. Libor, a rate banks say they can borrow in dollars from each other, will have a 1.25 percent floor.

The debt is expected to be sold to investors at 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

A $200 million euro denominated term portion is expected to pay interest 25 basis points higher than the larger, dollar-denominated term piece, according to the person.

Term-loan 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, said the person.

The financing also includes a $400 million, five-year revolving line of credit that will pay interest at 4 percentage points more than Libor, with a 100 basis-point fee being paid up-front, the person said. A basis point is 0.01 percentage points. Funds under the revolver can be obtained in more than one currency.

Commitment Deadline

Barclays Plc, Citigroup Inc., Deutsche Bank AG, Credit Suisse Group AG, Morgan Stanley, UBS AG, Jefferies Group Inc. and Sumitomo Mitsui Banking Corp. are arranging the debt, according to data compiled by Bloomberg. Investors have until Jan. 17 at 5 p.m. in New York to let the banks know whether they will participate in the deal, the person said.

Leverage, or debt to earnings before interest, taxes, depreciation and amortization, will be 5.6 times total, the data show. The debt is rated B1 by Moody’s Investors Service and B+ by Standard & Poor’s.

Carlyle Group is acquiring the business from Wilmington, Delaware-based DuPont for $4.9 billion and the transaction expected to close during the first quarter, according to an Aug. 30 company statement.

The deal is poised to be the largest buyout financing to be raised in the U.S. since Kinetic Concepts Inc. obtained a $2.45 billion loan in November 2011 for its purchase by Apax Partners Inc., Bloomberg data show.

More than $639 billion of loans were obtained by speculative-grade rated companies in the U.S. in 2012, surpassing levels from the previous year by about 8 percent.

Randall Whitestone, a spokesman for Carlyle Group, and Michael Hanretta, a spokesman for DuPont, declined to comment.

Blackstone Group LP is the world’s largest private-equity firm.

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