Bankers have lined up to US$2.5 billion-equivalent of debt financing to back the acquisition of publicly-listed Hong Kong-based international schools operator Nord Anglia Education Inc, banking sources said on Wednesday.
Global coordinators Deutsche Bank and HSBC, alongside bookrunners Credit Suisse and Macquarie, have underwritten a debt financing, which will be in the form of leveraged loans, denominated in dollars and euros.
Some US$2.5 billion of debt equates to around 7.5 times Nord Anglia’s Ebitda, the sources added.
The financing is set to be syndicated to institutional investors in the United States and Europe, the sources said.
Nord Anglia said it would be taken private by Canada Pension Plan Investment Board (CPPIB) and Baring Private Equity Asia on April 25, in a deal that values the company at US$4.3 billion, including debt.
CPPIB, Baring Asia and Nord Anglia were not immediately available to comment.
A number of U.S. bankers said they were unable to commit to the deal as leverage exceeds the 6.0 times debt-to-earnings ratio cap imposed on regulated banks that fall under the remit of the U.S. leveraged lending guidelines.
The investigative arm of Congress has been asked to review the guidelines on U.S. lending, released in 2013, that critics say have put a crimp in bank loans to businesses. U.S. Senator Pat Toomey asked the Government Accountability Office to determine the formal status of the guidelines, which have never been approved by Congress.
“High leverage excludes U.S. banks from these deals. It is very binary and there isn’t much leeway,” one of the sources said.
The deal is likely to be welcomed by banks and investors alike, frustrated by a surge of repricings and refinancings this year as sponsors take advantage of the excess levels of cash available to push for tighter pricing on portfolio credits, amid a lack of new money deals.
Baring has a 67 perecent stake in Nord Anglia, which operates 43 schools in 15 countries.
The deal includes a so-called go-shop period, during which Nord Anglia can evaluate proposals from other buyers for 30 days.
By Claire Ruckin
(Editing by Christopher Mangham)
Photo courtesy of Nord Anglia Education Inc