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Structure emerges on $3.8B HD Supply bond offering; terms

As the one-year anniversary of the closing of the LBO of HD Supply approaches, structure of the bond component of the financing has emerged. Unlike many of the hung bridges that converted into bonds on the 365th day after closing, as prescribed in the loan agreements, the HD Supply deal was in bond form since day one, according to sources.

Joint bookrunners on the $3.8 billion, two-part offering were J.P. Morgan, Merrill Lynch and Lehman Brothers. The entire portion is unsold and still sits with underwriters, sources said.

Home Depot a year ago agreed to sell its supply unit to Bain Capital, The Carlyle Group and Clayton, Dubilier & Rice for $8.5 billion. The transaction was revised downward from $10.3 billion as the air was whistling out of the LBO bubble. The revised deal terms included a guarantee by Home Depot on a $1 billion senior secured loan, a $325 million investment for a 12.5% equity stake by Home Depot, and a scaling back of the overall debt commitment to $6 billion. The deal closed and funded on Aug. 30, 2007.

A term sheet for the two-part bond issue follows. The transaction was minted last year when the LBO closed. Terms:

 

Issuer: HD Supply Inc
Ratings: B-/B3
Size: $2.5 billion
Issue: senior notes (144A)
Coupon: 12%
Price: 100.00
Yield: 12%
Spread: n/a
LIBOR Eq: n/a
Maturity: Sept. 1, 2014
Call: nc4
Trade: Aug. 29, 2007
Settle: Aug. 30, 2007 (t+1)
Books: JPM/ML/LEH
Px Talk: n/a
Notes: w/ three-year equity clawback for up to 35% of issue @112; w/ change of control put @101
Issuer: HD Supply Inc
Ratings: CCC+/Caa1
Size: $1.3 billion
Issue: subordinated PIK notes (144A)
Coupon: 13.5%
Price: 100.00
Yield: 13.5%
Spread: n/a
LIBOR Eq: n/a
Maturity: Sept. 1, 2015
Call: nc4
Trade: Aug. 29, 2007
Settle: Aug. 30, 2007 (t+1)
Books: JPM/ML/LEH
Px Talk: n/a
Notes: w/ three-year equity clawback for up to 35% of issue @113.5; w/ change of control put @101