Bahrain's Investcorp said to ink $504m loan deal
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Bahrain-based investment company Investcorp has signed up to a $504m-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 on Wednesday.
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.
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 $1.1bn 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 Plc, Citigroup Inc, Deutsche Bank and Royal Bank of Scotland , while Bank of America-Merrill Lynch, Commerzbank, ING and JP 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 Gulf Cooperation Council (GCC) currencies.
The three-tranche facility will be used to replace existing obligations - loans for $500m and $243m due in March and April 2013 respectively and a bilateral facility also maturing next year.
The overall amount being refinanced is slightly more than $700m 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 $420m in cash on its balance sheet at the end of 2011, a Feb. 22 note from Fitch Ratings said.