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Yum Restaurant Group Lines up $500M High Yield Offering for Dividend, Loan Repay

yum logoYum Brands has guided a $500 million offering of ten-year (non-call five) notes in the 4.75% area, sources said. Books will close at 2 p.m. EDT, with pricing expected today via bookrunners Goldman Sachs (left), J.P. Morgan, Citi, Morgan Stanley, and Wells Fargo Securities.

Proceeds from the 144A-for-life offering will be used to repay roughly $260 million drawn under the company’s revolving credit facility during the second quarter. The balance will fund a cash distribution to the company’s parent to fund share repurchases, dividend payments, and potential repayment of further debt.

The planned new issue is rated BB/B1, according to the leads.

Comparables for the new bonds are the borrower’s own 5% notes due 2024 and 5.25% notes due 2026. The 2024s closed Friday’s session at 104.6, yielding 3.97%, and the 2026s changed hands on Monday afternoon at 105.375, yielding 4.35%, trade data show.

Earlier this month, Yum Brands disclosed that it had entered into a refinancing amendment to its credit agreement dated June 16, 2016, reducing pricing on its $500 million A term loan and $1 billion revolver by 75 bps, to L+150, and extending the maturity of the TLA and revolver to June 2022, from 2019. Note that pricing includes a step-down to L+125 in the event that the total-leverage ratio is less than 2.75x. Via the amendment, the leverage-based pricing grid now ranges from L+125–175, versus L+200–250 previously, as reported. In March, Yum Brands also repriced its then $1.99 billion B term loan due June 2023.

Yum Brands (NYSE: YUM) operates and franchises quick-service restaurants in three segments: KFC, Pizza Hut, and Taco Bell. — Rachel McGovern/Jakema Lewis

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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 and high yield bond markets. You can learn more about LCD here.

 

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