Investcorp inks $504 debt refinancing deal
Manama, June 27, 2012
Bahrain-based Investcorp has signed up to a $504 million-equivalent loan aimed at refinancing debt due in 2013, with the final amount potentially being increased in the coming weeks as more banks join the lending syndicate, sources said.
The loan heads off any refinancing risk next year for the firm, which once owned luxury brands Gucci and Tiffany & Co but like other private equity houses in the Gulf has been hit in more recent times by unfavourable market conditions.
Investcorp wanted to secure funds ahead of its financial year-end on June 30 so the loan could be included in its full-year results, two banking sources said.
However, it also wanted to allow as much time as possible for banks to join the deal, meaning a so-called accordion clause was written into the documentation, one of the sources, a London-based banker, added.
The clause, which creates two signing dates for the same transaction, is uncommon in the Middle East but is a simple feature to add to documentation, a Gulf-based banker said.
Investcorp declined to comment.
By securing a refinancing well ahead of time Investcorp puts itself in a much stronger position than other investment houses in Bahrain which have faced refinancing issues.
In March Arcapita became the first Gulf entity to file for Chapter 11 bankruptcy protection in the United States after pressure from hedge funds ahead of a $1.1 billion loan maturity it was struggling to meet.
Four banks joined the Investcorp deal during the latest stage of syndication, taking the total number to 12, two sources said. Most of the banks involved are international names, they added.
The refinancing was led by Barclays, Citigroup, Deutsche Bank and Royal Bank of Scotland , while Bank of America-Merrill Lynch, Commerzbank, ING and J.P. Morgan Chase joined the loan during an early round of fundraising.
It is structured as a forward-start agreement, where a loan is raised and signed by banks but the term does not begin and the cash drawn down until a later date - usually when the loan matures. Forward-starts are often used to circumvent volatile market conditions, by putting finance in place ahead of time in case bank funding dries up or pricing increases.
The loan is split into three tranches, lasting 1.5 years, 2.5 years and 3.5 years. Commitments from banks were accepted in dollars, euros and all GCC) currencies.
The three-tranche facility will be used to replace existing obligations - loans for $500 million and $243 million due in March and April 2013 respectively and a bilateral facility also maturing next year.
The overall amount being refinanced is slightly more than $700 million as some of the debt has already been paid off by the company and Investcorp will pay any shortfall using internal cash, sources familiar with the matter said earlier this month.
Investcorp had around $420 million in cash on its balance sheet at the end of 2011, a February 22 note from Fitch Ratings said.-Reuters
More Finance & Capital Market Stories
- NBAD approves 40pc cash dividends
- NBAD sees 8-10pc loan growth
- Al Basel Group launches investment arm
- Union Insurance posts $18m profit
- Oman warns banks on conflicts of interest
- Japan to lend Tunisia $480m
- 400 to join anti-laundering seminar in Riyadh
- Lebanese insurer to head Prague Club
- UAE's first REIT plans $135m IPO
- Bahrain banking industry outlook 'positive'
- New India Assurance opens Bahrain branch
- Qatar sets up mixed business incubator
- Kuwait budget spending up 8pc in April-Jan
- Thomson Reuters to host Mena IFR awards
- ADIB offers smartphone industry investment
- Gulf Finance House to start $3bn Tunisia project
- KFH completes ICT project upgrade
- Egypt urban annual inflation slows to 9.8pc
- BIBF signs deal with Palestinian institute
- Bahrain’s GDP set to expand 12pc
- KFH-Bahrain rebrands priority banking
- Bank Nizwa wins top Islamic bank award
- Qatar labour costs may jump: IMF
- Kuwait Q3 trade surplus hits $23bn
- Dubai trade growth up 7.6pc to $362bn
- Deloitte appoints new managing director
- Al Ramz tops UAE trading in Feb
- IFC in $150m loan deal with Bank Audi
- SME funding focus for Abu Dhabi forum
- Insurance House posts second year of profit