Senior FacilitiesCarve-OutUnited Kingdom

£150M Senior Facilities for UK Carve-Out

Multi-currency senior term loan and revolving credit facility supporting private equity acquisition and carve-out of industrial manufacturing division from FTSE-listed parent.

Deal Overview

Transaction TypeSenior Facilities

Total Facilities£150M

SectorIndustrial Manufacturing

Leverage5.5x Net First Lien

Term7 years (TLB) + 5 years (RCF)

Structure£120M TLB + £30M RCF

JurisdictionEngland & Wales

Closing DateQ3 2023

The Challenge

A mid-market private equity sponsor acquired a specialty manufacturing division from a UK-listed industrial conglomerate, requiring senior debt financing to support the carve-out transaction and provide working capital runway.

Key complexity factors included:

•Separation from parent company systems requiring transitional services agreement
•Standalone financial statements requiring quality of earnings analysis
•Multi-currency requirements for European operations and supply chain
•Working capital volatility during separation period requiring flexible RCF

Our Solution

We structured £150M senior facilities package with Term Loan B and multi-currency revolving credit facility supporting the carve-out and providing operational flexibility. The solution included:

Structure

→£120M Term Loan B with 7-year maturity and amortization back-ended to years 5-7
→£30M multi-currency RCF with GBP, EUR, and USD sub-limits for working capital
→Covenant-lite Term Loan with springing financial covenant only on RCF if drawn >40%
→Accordion feature of £25M for post-separation bolt-on acquisitions

Execution

→10-week timeline from mandate to closing accommodating seller diligence process
→Quality of earnings and separation cost analysis supporting standalone business case
→English law security package over shares and business assets with standard perfection
→TSA provisions in credit agreement addressing separation dependencies

Deal Structure

Facility Structure

Term Loan B£120M

RCF£30M

Accordion£25M

Sponsor Equity£55M

Covenants

•Term Loan: Covenant-lite (incurrence only)
•RCF Springing: 6.5x Net Leverage if >40% drawn
•Portability: Sponsor-friendly transfer provisions
•Restricted Payments: Builder basket with grower options

Key Documentation

Senior Facilities Agreement

LMA-based facilities agreement with Term Loan B and multi-currency RCF, covenant-lite structure, and carve-out specific representations addressing separation process.

Security Documents

English law share charge over UK holdco, fixed and floating charges over business assets, and ancillary security for overseas subsidiaries.

Intercreditor Agreement

Lender intercreditor and creditors representative structure establishing voting mechanics, enforcement procedures, and turnover provisions.

TSA Side Letter

Side letter addressing transitional services agreement with seller parent, separation milestones, and lender consent requirements for TSA modifications.

Transaction Timeline

1-2

Weeks 1-2

Debt Raise & Term Sheet

Lender marketing process, management presentations, and term sheet negotiation with selected lender group

3-6

Weeks 3-6

Due Diligence & Documentation

Financial, legal, and commercial due diligence, quality of earnings analysis, and facilities agreement drafting

7-9

Weeks 7-9

Security Perfection & Separation Planning

Security documentation, TSA negotiation with seller, and separation milestone planning

Week 10

Signing & Closing

Simultaneous signing and funding coordinated with share purchase completion and TSA commencement

Outcome

The transaction closed successfully, enabling the sponsor to complete the carve-out acquisition with appropriate financing structure and operational flexibility during separation.

Post-closing benefits:

•Separation completion: Business successfully separated from parent systems within 18 months with RCF providing working capital flexibility throughout process
•Bolt-on acquisition: Company completed first add-on acquisition 14 months post-closing using £15M of accordion capacity at favorable terms
•Covenant flexibility: Covenant-lite structure enabled operational focus on integration without quarterly maintenance testing distractions

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