LPC-LGC sale to test bank’s appetite for leveraged underwriting
By Hannah Brenton and Tessa Walsh
LONDON (Reuters) - Banks are lining up debt financing to back the sale of forensic science group LGC, which is expected to test banks’underwriting appetite in a higher risk environment, banking sources said on Wednesday.
First round bids on the sale, which is attracting interest from private equity firms, are due on Monday, the sources said.
"The market in the last few weeks has been very tough, its hard to work out where to underwrite new deals," a banker said.
LGC, which is the world’s largest private provider of forensic science, according to its website, is expected to fetch around 650 million pounds. JP Morgan and HSBC are acting as sellside advisers.
Bridgepoint Partners bought LGC in 2010 from LGV Capital for 257 million pounds. Bridgepoint declined to comment.
Apax Partners, Clayton, Dubilier & Rice, Astorg and EQT are vying for the company, one source said. Some trade buyers are also interested in bidding, another source said.
The deal is expected to be the next large leveraged loan to reach the market after the 1.02 billion euro ($1.16 billion) term loan B backing Hellman & Friedman's acquisition of a stake in Swedish security company Verisure, which is currently in the market.
September's global market disruption has proved difficult for arranging banks as investors are calling for higher pricing and other concessions to compensate for perceived higher risk.
Pricing and discounts were widened on a 505 million euro loan for German rehabilitation clinics business Median Kliniken on Wednesday.
Leverage on the financing packages that are being discussed for the LGC sale are relatively high at around 6.5-6.75 times Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA), bankers said.
Private equity bidders have also been discussing including a second lien loan in the financing, which has second claim over assets in the event of bankruptcy, but are cautious about how to price riskier junior debt.
"To offer an underwrite to sponsors, you have to be competitive, but you don't want to lose money," the banker said.
(Editing by Alasdair Reilly)
