(Bloomberg) -- A group of direct lenders including Ares Management Corp. and HPS Investment Partners is providing a $3 billion credit facility to finance Carlyle Group Inc.’s potential purchase of Baxter International Inc.’s kidney-care division, according to people with knowledge of the matter.
The debt package would include a $2.5 billion unitranche loan and a $450 million revolver, said the people, who asked not to be identified because terms are not public.
Oaktree Capital Management is also providing some of the financing, one of the people said. There is an allowance in the financing agreement for smaller positions to go to other lenders post-signing, the person added.
An acquisition agreement hasn’t been signed and a deal may not happen, the people said. The facility’s interest would be five percentage points above the Secured Overnight Financing Rate, and the initial borrowings would put Vantive’s leverage at 4.2 times pro-forma earnings, the people added.
Representatives for Ares, Carlyle, HPS and Oaktree declined to comment. Baxter didn’t immediately reply.
The Wall Street Journal reported earlier this month that Carlyle was in advanced talks to buy Vantive for more than $4 billion, including debt. Baxter began the process to split off the kidney-care business early last year, and Vantive’s 2023 revenue was $4.5 billion.
The complexity and time it takes to carve out a business can make it challenging for banks to compete on deals where private equity sponsors purchase entire divisions from larger companies. That allows direct lenders in the $1.7 trillion private credit market to win sizable deals as they and banks battle to win financing appointments.
Vantive would be at least the third deal that Ares and HPS team up to on regarding the carveout of a health-care division.
The duo, along with a handful of other lenders, committed $4.8 billion earlier this year toward the acquisition of pharmaceuticals manufacturer Catalent Inc. Private credit lenders led by Ares last year agreed to provide $1.95 billion of financing for the buyout of Baxter’s contract medical manufacturing unit.
Baxter started weighing the sale of two kidney-care operations in 2022, following its $10.5 billion purchase of Hill-Rom.
--With assistance from Ellen Schneider.
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