Caryle Said to Cut Rate on $2.7 Billion of Loans for DuPont Unit

Carlyle Group LP cut the interest rate it will pay on $2.7 billion of loans the private-equity firm is 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 B will pay interest at 3.5 percentage points more than the London interbank offered rate, down from 3.75 percentage points, said the person, who asked not to be identified because the information is private. The Libor floor remains unchanged at 1.25 percent.

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

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.

The rate on a $400 million five-year revolving line of credit was also reduced to 3.5 percentage points more than Libor, from 3.75 percentage points, said the person. Lenders are being offered a 100 basis-point fee being paid up-front, according to data compiled by Bloomberg.

The deal includes a seven-year 390 million euro-denominated ($518 million) term portion paying interest at 4 percentage points more than Libor with a 1.25 percent floor and is expected to be sold to investors at 99.5 cents, the data show. Lenders to the euro piece are also being offered one-year soft-call protection of 101 cents.

Both term portions will be covenant-lite, meaning the debt won’t carry typical lender protection such as financial-maintenance requirements.

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, Bloomberg data show. Commitments on both the dollar-denominated and euro piece are due today, according to the person.

Leverage, or debt to earnings before interest, taxes, depreciation and amortization, will be 4.5 times on a senior secured basis and 5.6 times total, the data show. The debt is rated B1 by Moody’s Investors Service and B+ by Standard & Poor’s.

Dupont Performance Coatings is also seeking 250 million euros of secured notes as well as $750 million of senior unsecured notes, which are expected to price this week, the data show.

Carlyle Group, the world’s second-largest private-equity firm, is acquiring DuPont Performance Coatings for $4.9 billion in a deal poised to be the largest buyout financing 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.

Randall Whitestone, a spokesman for Carlyle Group, declined to comment.

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

Before it's here, it's on the Bloomberg Terminal.