Debt funds and banks are in fray to provide financing to support the potential buyout of medical technology company Dutch Ophthalmic Research Center, or DORC, ahead of nonbinding offers in November, sources told Reorg.
Sponsors are looking for additional PIK financing on top of just over 4x of senior debt, the pricing of which dropped to 2nd lien level causing some lenders to pass, sources said. With price talk of Euribor +7.5% on the PIK tranche, some potential providers feel that they would not be adequately compensated for their position in the capital structure, sources added.
Debt funds are pitching unitranche at up to 5.5x and pricing in the low-6% region, with an additional turn of PIK and a committed acquisition facility, while banks are pitching just over 4x all senior with an additional 1.5x-2x of PIK financing touted, sources said.
Some sponsors are also pushing for cov-lite but potential lenders are considering whether this would be appropriate given the size of the deal, the sources said. The debt package will be between €350 million and €400 million, including a committed acquisition facility. DORC is being marketed off EBITDA of between €50 million and €60 million, as
reported.
Private equity bidders have expressed strong interest in the asset and the sector. However, U.S.-based Johnson & Johnson could outbid sponsors if it submits an offer, one source noted. Potential bidders include PAI, Cinven, GBL, Bain, Ardian and EQT, while strategic bidders are also in the race, sources said. Also, CVC, which owns DORC’s peer Rayner and could extract synergies from combining the two assets and therefore offer a higher price.
The credit arms of Bridgepoint, Goldman Sachs and Partners Group provided a cov-lite unitranche at 6x leverage to refinance the company’s existing debt in December 2021, as
reported. The incumbent lenders are keen to remain in the group, sources said.
In 2019, Eurazeo financed the buyout of DORC with a €155 million term loan B, which priced at Euribor+425 bps. The financing package included a small RCF. Bookrunners on the deal were ING and Jefferies, with Bank of Ireland, HSBC and UniCredit acting as arrangers.
DORC designs, manufactures and distributes ophthalmic surgery equipment, consumables and instruments.
Cinven, Bain, GBL, PAI, Eurazeo, Ardian and Rothschild declined to comment. Johnson & Johnson did not return a request for comment.