content

Staples Wraps $1B High Yield Bond Offering Backing Sycamore LBO

Staples has completed a $1 billion offering of eight-year notes at the wide end of talk, sources said. Bank of America Merrill Lynch was lead on a bookrunner group that included 10 additional banks. Proceeds will be used to back the issuer’s $6.9 billion buyout by Sycamore Partners. The transaction was downsized from $1.3 billion. A concurrent first-lien term loan also backing the LBO transaction was increased by $200 million, to $2.9 billion. There has also been a $100 million decrease in funded debt, sources said. Prior to launching, the borrower had planned for $1.6 billion of the bonds, but steered $300 million to the TLB to meet investor demand. A $1.2 billion ABL facility will also be put in place to back the LBO. The buyout is expected to close in 2017. Terms:

Issuer Staples (Arch Merger Sub Inc)
Ratings B–/B3
Amount $1 billion
Issue Senior (144A/Reg S-for-life)
Coupon 8.5%
Price 100
Yield 8.5%
Spread T+637
Maturity Sept. 15, 2025
Call non-call three (first call at par + 50% of coupon)
Trade Aug. 14, 2017
Settle Aug. 28, 2017 (T+10)
Joint bookrunners BAML/UBS/DB/CS/RBC/JEFF/FifthThird/GS/C/KKR/ Natixis
Price talk 8.25% area
Notes Downsized from $1.3 billion; up to 40% equity claw @ 108.5 until Sept. 15, 2020; change-of-control put @ 101; make-whole @ T+50

Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Staples Readies $1.3B High Yield Bond Offering Backing LBO by Sycamore

staplesStaples is on the cusp of kicking off roadshows for $1.3 billion of eight-year (non-call three) notes backing the buyout of the company by Sycamore Partners. An investor call and lunch is scheduled for tomorrow, Aug. 10 at 12:30 p.m. EDT. Pricing is expected next Monday.

Joint bookrunners on the deal are Bank of America Merrill Lynch, UBS, Deutsche Bank, Credit Suisse, RBC Capital Markets, Jefferies, Fifth Third, Goldman Sachs, Citi, KKR Capital Markets, and Natixis. The debt is being shopped with a first call at par plus 50% coupon and an up to 40% equity claw for the first three years. Issuance will come under Rule 144/Reg S-for-life.

S&P Global Ratings on Aug. 8 downgraded for the borrower’s corporate rating to B+, from BBB–. It has assigned a B–, with a 6 recovery rating, to the notes.

Similarly, that same day Moody’s lowered its unsecured rating for Staples to B3, from Baa2, and assigned a B1 corporate rating to the company.

The move from both agencies was triggered by Sycamore’s leveraged buyout of the company.

Meanwhile, the borrower today upsized a first-lien term loan by $300 million, to $2.7 billion. The same amount was removed from the notes offering, which was originally expected to be a $1.6 billion issue. A $1.2 billion ABL facility will also be put in place.

At closing of the acquisition, there will be an internal reorganization whereby the U.S. retail, Canadian retail, and the North American delivery businesses of Staples will be separated into standalone entities. The $5.2 billion debt package is for the financing of the North American delivery segment, which will leverage the business on a pro forma basis at approximately 4x, sources note. The transaction is expected to close in 2017.

Staples (Nasdaq: SPLS) in June disclosed that Sycamore would acquire the company in a $6.9 billion transaction. Under the terms of the agreement, Staples’ stockholders will receive $10.25 per share. — Staff reports

Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Hi-Grade Bonds: Coach Wraps $1B Offering Backing $2.4B Kate Spade Buy

Coach Inc. today locked in $1 billion of acquisition-related bond funds to finance its purchase of Kate Spade. The two-part senior offering included $400 million of 3% notes due July 15, 2022 at T+140, or 3.106%; and $600 million of 4.125% notes due July 15, 2027 at T+200, or 4.142%.

Both tranches were printed at the firm end of guidance in the T+145 and T+205 areas and through initial whispers in the areas of T+162.5 and T+225, respectively.

The New York–based luxury-goods company placed a debut senior unsecured offering in February 2015 for its acquisition of luxury-footwear company Stuart Weitzman. It printed $600 million of 4.25% 10-year notes due April 2025 at T+225, and the issue has traded over the last month at G-spreads bracketing 185 bps, before accounting for roughly 11 bps on the curve, according to MarketAxess.

In May, Coach announced that it would acquire competitor Kate Spade & Company for $18.50 per share in cash for a total transaction value of $2.4 billion. The deal is expected to close in the third quarter of this calendar year. Since then, Coach disclosed that it obtained a $2.1 billion unsecured bridge term loan credit family from BAML, and a $2 billion loan package from a group of 13 banks, the latter across a $900 million revolving loan facility; an $800 million, six-month term loan credit facility; and a $300 million, three-year term loan facility.

The acquisition will be funded with proceeds from today’s bond offering, along with cash on hand at Coach and Kate Spade, and roughly $1.1 billion in term loans (that the company expects to borrow at or around the time the merger is completed), according to regulatory filings. Additionally, Kate Spade’s $385 million term loan will be repaid with its own cash on hand, filings show.

The deal carries a special mandatory redemption at 101 if the merger is not completed by Feb. 7, 2018. Additionally, the structure offers investor protections via 25 bps coupon steps per each notch downgrade by ratings agencies below the investment-grade level, to a maximum of 200 bps, falling away on a rise at BBB+/Baa1.

Earlier today, S&P Global Ratings, Moody’s, and Fitch assigned respective BBB–/Baa2/BBB ratings to the new offering, which is expected to be $1 billion in size.

The acquisition did not trigger ratings actions from S&P Global Ratings, which only confirmed its current rating and stable outlook. “Pro forma for the new debt and acquisition, we forecast FFO to debt will decrease to mid-30% and improve to high-30% by the end of fiscal 2018 on the repayment of the $800 million term loan and continued EBITDA growth,” the agency said today.

Following the merger announcement, Moody’s reviewed its rating for a possible downgrade, but last week it confirmed the rating and revised the outlook to negative. “While the acquisition will increase the combined company’s pro forma leverage to 3.3 times from 2.0 currently, we expect leverage to decline to about 2.6 times in the next 12 months as the company plans to repay $800 million of debt using its cash balance and make additional prepayments using operating cash flow,” analysts said today.

“The negative outlook reflects the enhanced execution, integration and business risks that accompany the acquisition of Kate Spade particularly in light of the secular shifts in the overall retail business environment, the ever changing fashion trends and over promotion which could result in slowing EBITDA growth,” Moody’s said on June 1 when it revised its outlook.

Fitch—which last month placed its BBB rating on Rating Watch Negative, and anticipates a one-notch downgrade to BBB– once the merger is complete—today assigned its current rating to the new offering. “The acquisition would cause Coach’s leverage to increase from the current 2.6x level to 3.7x on a pro forma basis at closing and decline to around 3.3x at the end of FY 2018 upon the repayment of the $800 million six-month term loan. Leverage is expected to trend to under 3.0x over the following two years on EBITDA growth,” analysts said today. Terms:

Issuer Coach Inc.
Ratings BBB–/Baa2/BBB
Amount $400 million
Issue SEC-registered senior notes
Coupon 3.000%
Price 99.505
Yield 3.106%
Spread T+140
Maturity July 15, 2022
Call Make-whole T+25 until notes are callable at par from one month prior to maturity
Px Talk Guidance: T+145 area (+/– 5 bps); IPT: T+162.5 area
Issuer Coach Inc.
Ratings BBB–/Baa2/BBB
Amount $600 million
Issue SEC-registered senior notes
Coupon 4.125%
Price 99.858
Yield 4.142%
Spread T+200
Maturity July 15, 2027
Call Make-whole T+30 until notes are callable at par from three months prior to maturity
Trade June 6, 2027
Settle June 20, 2017
Books BAML/JPM(act)/HSBC(pass)
Px Talk Guidance: T+205 area (+/–5 bps); IPT: T+225 area
Notes Proceeds will be used to fund a portion of the Kate Spade acquisition
Deal includes 25 bps coupon steps per notch downgrade below investment grade
Special mandatory redemption at 101 if merger is not complete by Feb. 7, 2018


Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story is taken from analysis which first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan, high yield bond, and investment grade markets. You can learn more about LCD here.

content

Amerigas Sets $525M High Yield Bond Deal Backing M&A

AmeriGas Partners today placed a $525 million offering of 10.25-year bullet notes at the wide end of talk, sources said. Bookrunners for the SEC-registered deal were J.P. Morgan, Wells Fargo, Bank of America Merrill Lynch, and Citigroup. Proceed will be used to back a tender offer for the company’s 7% notes due 2022. In December, the company printed $700 million of 5.5% notes due 2025, also to back the redemption of the 7% notes due 2022. King of Prussia, Pa.–based AmeriGas (NYSE: APU) distributes propane and related equipment and supplies in the U.S. Terms:

Issuer AmeriGas Partners
Ratings Ba3/BB (Moody’s/Fitch)
Amount $525 million
Issue Senior (SEC-registered)
Coupon 5.75%
Price 100
Yield 5.75%
Spread T+336
Maturity May 20, 2025
Call non-callable for life
Trade Feb. 6, 2017
Settle Feb. 13, 2017
Sole bookrunner JPM/WFS/BAML/C
Price talk 5.5–5.75%
Notes


Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Lennar Drives By High Yield Bond Mart with $350M Offering

lennarHomebuilder Lennar Corp. is driving by with $350 million of five-year bullet notes today in an SEC-registered offering, sources said. An investor call for the deal is scheduled for noon EST through bookrunners J.P. Morgan, Bank of America Merrill Lynch, Deutsche Bank, Goldman Sachs, Mizuho, RBC Capital Markets, and Wells Fargo.

The borrower will use the proceeds to fund its acquisition of luxury homebuilder WCI Communities. Lennar announced in September 2016 a merger agreement with WCI, under which it would acquire all of the outstanding shares of the company’s common stock in a transaction valued at $23.50 per WCI share. The transaction gives WCI a total equity value of approximately $643 million and an enterprise value of $809 million.

Proceeds from the notes will also be used for general corporate purposes.

Banks are guiding the offering with expected BB/Ba1 ratings.

Lennar last tapped the market in February 2015 to print $500 million of 4.75% bullet notes due 2021 for general corporate purposes. Pricing for the public offering was at par, and trade data show the notes closed Wednesday’s session at 103.5, for a 3.83% yield.

Miami-based Lennar (NYSE: LEN) engages in homebuilding activities in the United States, primarily through the construction and sales of single-family attached and detached homes. The company has a market cap of $9.9 billion and $6.4 billion in total debt, according to S&P Global Market Intelligence. — Jakema Lewis

Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Level 3 Inks Amendment to not Trigger Change-of-Control Provision

Level 3 Communications disclosed that it has entered into an amendment to provide that CenturyLink’s proposed acquisition of the company would not constitute a change of control under its credit agreement and senior notes.

In connection with the amendment, Level 3 agreed to refresh the 101 soft call premium for six months.

Bank of America Merrill Lynch is administrative agent.

As reported, Bank of America and Morgan Stanley committed to provide debt financing to support CenturyLink’s proposed acquisition of Level 3 in a cash-and-stock deal valued at $34 billion.

The financing commitment is for approximately $10.2 billion of secured debt comprising a new $2 billion revolver, which will be undrawn at close, and approximately $8.2 billion of funded secured debt. CenturyLink expects to use $7 billion of the funded debt to finance the cash portion of the deal, and the balance is earmarked to refinance debt expected to mature prior to closing.

Level 3 has about $4.6 billion of term debt outstanding, including its B-3 term loan due August 2019 (L+300, 1% LIBOR floor), a B-2 term loan due May 2022 (L+275, 0.75% floor), and around $5.9 billion of bonds, including the company’s 5.625% notes due 2023 and 5.25% notes due 2026.

Under the terms of the deal, Level 3 shareholders would receive $66.50 per share, 60% in stock and 40% in cash. The deal is expected to be completed by the end of the third quarter 2017, subject to regulatory approvals and other closing conditions.

The combined company would generate around $11 billion of adjusted annual EBITDA on revenue of $26 billion, including synergies. Pro forma net leverage will be less than 3.7x at close, with a long-term target of about 3x, according to the company.

Current corporate ratings of CenturyLink are BB/Ba2. Level 3 is rated BB/Ba3. — Staff reports

Try LCD for Free! News, analysis, data

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

5-Hour Energy Scraps Financing Deal after Sale of company Falls Through

Arrangers for Innovation Ventures, the maker of 5-Hour Energy drinks, pulled the company’s two-pronged financing package this morning after the sale to Renew Group Private fell apart.

5 Hour Energy logoThe financing package included a $525 million senior secured loan and a $400 million senior note issue that had been circulating the market, according to sources. Proceeds would have backed Renew Group’s purchase and refinanced outstanding bonds.

Innovation Ventures is still evaluating plans that would allow it to refinance its debt, the company stated this morning in a press release.

Bank of America Merrill Lynch and KeyBanc Capital Markets were arranging the loan and had set price talk of L+450, with a 1% LIBOR floor and a 99 offer price on a $500 million term loan.

S&P Global Ratings rated the issuer B+ and the first-lien debt BB, with a 1 recovery rating. The proposed bonds drew B–, with a 6 recovery rating.

As reported, Farmington Hills, Mich.–based Innovation Ventures is 80% directly or indirectly owned by CEO Manoj Bhargava, who would have sold a roughly 80% stake through a trust. — Kelsey Butler

Follow Kelsey and LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Diamond Resorts Launches $600M High Yield Bond Offering Backing Apollo LBO

Diamond Resorts is offering $600 million of eight-year (non-call three) unsecured notes, sources say. Bookrunners on the deal are RBC Capital Markets (left), Barclays, and Jefferies.

A roadshow for the offering will run Aug. 1–4, sources noted. The proceeds will be used to back Apollo Management’s $2.2 billion purchase of Diamond Resorts. Apollo in late June agreed to acquire the company for $30.25 per share. At the time the deal was announced, the company said closing was expected over the next few months.

Take note, the issuer is also shopping a $1.2 billion seven-year term loan B and a $100 million revolver to fund the buyout. Price talk for the loan has been set at L+500, with a 1% LIBOR floor and a 99 offer price.

Expected ratings for the notes are CCC+/Caa1. On July 25, S&P Global Ratings lowered its corporate credit rating for Diamond Resorts to B from B+, noting the incremental leverage and the company’s financial sponsor ownership.

Diamond Resorts International operates a network of more than 420 vacation destinations located in 35 countries throughout the continental U.S., Hawaii, Canada, Mexico, the Caribbean, South America, Central America, Europe, Asia, Australasia, and Africa. — Staff reports

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Revlon Prices Upsized (to $450M) High Yield Bond Offering Backing Elizabeth Arden Buy

Revlon Consumer Products yesterday placed bonds via Bank of America Merrill Lynch as left lead and joint bookrunners Citigroup, Credit Suisse, Deutsche Bank, Macquarie, and Barclays. The bonds came at the tight end of guidance and were upsized by $50 million. Revlon will use the proceeds, revlonalongside borrowings under new senior credit facilities and cash on hand, to refinance certain existing Revlon debt, repay and retire all of Elizabeth Arden’s existing debt, and fund the $870 million purchase of Elizabeth Arden. Revlon is also set to allocate today a $1.8 billion, seven-year term loan B at L+350, with a 0.75% LIBOR floor, at 99.5. The New York–based company sells beauty and personal care products. Terms:

Issuer Revlon Escrow Corp
Ratings B+/B3
Amount $450 million
Issue Senior
Coupon 6.25%
Price 100
Yield 6.25%
Spread T+481
Maturity Aug 1, 2024
Call nc3
Trade July 21, 2016
Settle Aug 4, 2016 (T+10)
Jt Books BAML (left), Citi, CS, DB, Macq, Barc
Px talk 6.25–6.5%
Notes Upsized by $50M

 

Follow LCD News on Twitter.

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.

content

Hi-Grade: As Bond Market Beckons, Teva Looks to Accelerate Actavis Financing

Teva Pharmaceutical Industries today confirmed widespread market expectations that a much-anticipated blockbuster debt offering backing its $40.1 billion acquisition of Allergan’s generics business, Actavis Generics, may be only days away.

Teva logoTeva CEO Erez Vigodman said today on a 2016 updated guidance call that management is “closely monitoring the corporate bond markets” for a potential acceleration of the bond deal, “given the very attractive terms currently prevailing there.” (Notably, Walt Disney last Thursday printed the lowest-ever coupons for 10- and 30-year debt, while Molson Coors Brewing on June 28 garnered the lowest 30-year coupon by a BBB–/Baa3 issuer, according to LCD, an offering of S&P Global Market Intelligence.)

Teva officials said on today’s call that the only remaining obstacle to the deal closing is clearance from the Federal Trade Commission (FTC), which “could come at any time.” The company today also filed a Form F-3 post-effective amendment with the SEC, citing current estimates for the acquisition close to “occur shortly.”

According to reports, Teva has tapped BAML, Barclays, BNP Paribas, Credit Suisse, HSBC, and Mizuho for fixed-income calls in the U.S. through tomorrow, followed by presentations in Europe Monday and Tuesday, as the company eyes issuance in denominations potentially including U.S. dollars, euros, and Swiss Francs.

But the total size of the bond offerings may also be smaller than expected. Teva said today that the net cost of the acquisition has shrunk by $5 billion, to $35.1 billion, based on a substantially higher-than-expected $2.9 billion of upfront proceeds this year from mandated asset divestitures to garner regulatory approvals (Teva last year envisioned shedding only about $400 million of assets), $1 billion from a working capital adjustment and proceeds from a sale of products back to Allergan, and $1.5 billion from a change in the expected equity value.

The lower cost necessitates less in debt financing, the company said today. Deal financing needs started at $27 billion last year, and are now roughly $23 billion, including the $5 billion of A term loans ($2.5 billion due November 2018 and $2.5 billion tranche due November 2020) inked late last year, alongside a $4.5 billion senior unsecured revolver. Net debt at closing is now seen at roughly $34 billion, or $4 billion less than initial company projections last year, and that suggests that Teva may shop a long-term debt package below widespread expectations in recent weeks for total issuance in the neighborhood of $20 billion.

Teva expects to slash its net financial debt leverage over the next few years via the deployment of its roughly $25 billion of projected cumulative free cash flow through 2019, including the $2.9 billion of upfront asset-divestiture proceeds, and reflecting expectations for a ramp higher in free cash flow from $4.9 billion last year, to $7.2–7.8 billion annually by 2019.

However, Fitch in April cautioned that “elevated debt leverage may linger somewhat” following the acquisition, as the company has stated that it intends to stay on the hunt for M&A opportunities over the medium-term. But Fitch does expect leverage—which it sees spiking to more than 4x pro forma for the deal close, from 1.5x at the end of 2015—to ebb near 3x over the next two years as it repays 2016–2017 debt maturities and term-loan obligations, keeping Teva comfortably in compliance with credit agreement covenants.

(The term loans include a leverage test set at 5.25x, stepping to 5x two quarters after closing, and then to 4.25x two quarters after that, and to 4x two quarters after that, and then to 3.5x thereafter. The term loan is also covered by an interest-coverage test.)

While ratings agencies are reviewing all three sides of the present BBB+/Baa1/BBB+ profile for downgrade, all three agencies have stated in recent months that downgrades are likely to be limited to one notch.

Teva has not tapped the U.S. markets for long-term debt financing since December 2012, when it placed $2 billion of senior notes across $700 million of 2.25% long seven-year notes due March 18, 2020 at T+110, and $1.3 billion of 2.95% 10-year notes due Dec. 18, 2022 at T+125. Proceeds of that offering backed the repayment of debt associated with its $6.8 billion acquisition of Cephalon in 2011, which necessitated the issuance that year of $5 billion of notes in six parts.

Teva debt has held steady through the expectations for large-scale issuance. The 3.65% notes due November 2021, which date to that 2011 bond offering as a 10-year deal at T+170, changed hands today at T+132 versus the five-year Treasury rate, or the firm end of a trading range from T+130–150 in recent weeks, with the wider levels corresponding with the rout of global credit markets late last month on the shattering Brexit outcome, trade data show. — John Atkins

Follow LCD News on Twitter

This story first appeared on www.lcdcomps.com, an offering of S&P Global Market Intelligence. LCD’s subscription site offers complete news, analysis and data covering the global leveraged loan and high yield bond markets. You can learn more about LCD here.