RAC Marketing 1.2 Billion-Pound Covenant-Light Deal

RAC Ltd.’s planned 1.2 billion-pound ($2 billion) loan is the biggest deal to be offered in the U.K. currency with limited lender protections, according to data compiled by Bloomberg.

The roadside assistance company is seeking to raise the money through covenant-light loans, which don’t curb the ratio of debt the borrower can have compared with earnings and cash on its balance sheet and lack testing requirements on other performance metrics. Protection measures will apply only to a 50 million-pound revolving credit facility should RAC use part of it, a so-called springing covenant, according to people familiar with the matter.

The fundraising follows an agreement last month by RAC owner, Carlyle Group LP, to sell 50 percent of the company to Singapore’s sovereign wealth fund GIC Pte Ltd. Washington-based Carlyle bought RAC in 2011 from Aviva Plc and the new debt will refinance existing facilities and pay a dividend to the private equity firm.

Walsall, England-based RAC is seeking to borrow 965 million pounds of senior debt maturing in 2021 and 235 million pounds of junior loans due in 2022. GIC will invest in the junior portion.

(Corrects amount in first paragraph.)
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