Ares and HPS Could Provide $3B to Back Carlyle’s Potential Acquisition of Baxter’s Kidney-Care Unit; Pricing Indicated at SOFR+500 Bps

Relevant Document:
Form 8-K

Private lenders Ares Management and HPS Investment Partners are in talks with private equity firm Carlyle to provide roughly $3 billion debt financing to back Carlyle’s potential acquisition of Baxter International’s kidney-care business, according to sources.

The debt financing package would include a $2.5 billion unitranche loan and a $450 million revolver, according to sources. Pricing on the facility is indicated at about SOFR+500 bps, according to sources. Terms of the transaction are evolving and they might change, a source cautioned.

As of March 31, Baxter International had $13.73 billion of long-term debt and current maturities, including lease obligations with over $3 billion in cash and cash equivalents. The company had $130 million outstanding under one tranche of a term loan due 2024 and $1.64 billion outstanding under the another term loan credit facility due 2026, according to Securities and Exchange Commission filings. A list of Baxter International’s existing CLO holders can be found in Reorg’s CLO database HERE.

The Wall Street Journal and Reuters reported earlier this month that Carlyle was in advanced talks to acquire Baxter’s kidney-care unit, Vantive, for more than $4 billion, including debt.

Baxter International announced its plan to explore a sale of its kidney-care business in March. The company is committed to completing the separation in the second half of 2024, as shown in an SEC filing.

A separate SEC filing in mid-July shows that the healthcare company previously arranged senior unsecured term loans with JPMorgan Chase Bank and other banks for up to $2.05 billion. Part of the funds will be used for U.S. tax payments related to the planned separation of Baxter’s kidney-care business.

Fitch Ratings said in a commentary in June that the divestiture of the kidney-care unit would weaken Baxter International’s scale, diversification and market strength, given its significant revenue from the renal care sector. Fitch has rated Baxter’s debt BBB-, but the ratings agency does not provide any other ratings and analysis.

Vantive had total revenue of roughly $4.5 billion in 2023, along with more than 22,000 employees, according to the company’s site.

Headquartered in Illinois, Baxter International primarily focuses on products to treat kidney disease and other chronic and acute medical conditions.

In May 2023, the company sold its BioPharma Solutions business to private equity firms Advent International and Warburg Pincus for $4.25 billion, according to an announcement.

Ares declined to comment. Carlyle, HPS Investment Partners and Baxter International did not respond to a request for comment.