ZF net debt seen at $11 billion after TRW deal - source

FRANKFURT (Reuters) - German auto supplier ZF Friedrichhafen's [ZFF.UL] net debt will rise to some 8.5 billion euros (6.71 billion pounds), or about 2.4 times core earnings (EBITDA), after it buys rival TRW (TRW.N), a banker familiar with the deal said.

Earlier this week, ZF agreed to buy U.S.-based TRW for $13.5 billion (8.28 billion pounds) including debt, paying $105.60 in cash for each TRW share, or nearly $12 billion based on shares outstanding.

Unlisted ZF, which is controlled by a foundation, had no long-term debt before the takeover, the banker said. ZF declined to comment for this story.

The acquisition of Livonia, Michigan-based TRW, which makes airbags, electronics, and electronic sensors, by ZF, itself a major provider of steering systems and drivetrains, will create one of the largest auto supply firms in the world.

To complete the deal, ZF got a 12.5-billion euro financing package from Deutsche Bank and Citi, consisting of a bridge loan, a revolving credit and bank loans, a banker familiar with the matter said.

The banks are marketing the loan for syndication to a consortium of about 20 banks, with some lenders taking loan portions in a triple digit million amount, the person said.

ZF is seeking a credit rating so it can eventually replace the bank loans with investment-grade bonds.

To achieve an investment-grade rating, it needs to bring down its net debt to EBITDA (earnings before interest tax, depreciation and amortisation) ratio to about 2 times.

Net debt will be about 8.5 billion euros after accounting for existing cash and liquid financial assets of the two companies, one source said. Based on a combined EBITDA of some 3.1 billion euros for ZF and TRW in 2013, that would give ZF debt leverage of around 2.7.

Assuming ZF and TRW continue growing, their combined EBITDA would amount to 3.5 billion euros at the end of 2014, the banker said, which would bring its net debt to EBITDA ratio to 2.4.

This figure excludes proceeds from the sale of a steering systems joint venture which ZF sold to Bosch [ROBG.UL] this week for more than 550 million euros, one of the people familiar with the transaction said.

(Reporting by Edward Taylor; editing by Thomas Atkins and David Clarke)