A Citigroup-led arranger group today cut pricing for a second time on the $4.3 billion covenant-lite B term loan backing BC Partners’ acquisition of PetSmart, lowering the spread by an additional 25 bps, to L+400, according to sources.
The 1% LIBOR floor and 99.5 offer price are unchanged from yesterday’s reverse-flex, but note that original guidance was for pricing of L+450-475, with a 1% floor and a 99 OID.
With today’s change, the loan offers a yield to maturity of about 5.19%, versus 5.45% after yesterday’s reverse-flex and 5.8-6.07% at the initial guidance.
Recommitments are due by 5:00 p.m. EST on Tuesday, Feb. 17, and sources note that no new commitments are being accepted. Allocations are expected in the latter half of next week.
Citigroup, Barclays, Deutsche Bank, Nomura, Jefferies, RBC Capital Markets, and Macquarie are arranging the loan; Natixis is a co-manager on the financing.
Though the LBO is expected to close the week of March 9 (the shareholder vote is slated for March 6), a ticking fee of the full spread and floor would kick in on Friday, March 20, should closing be delayed, sources noted.
Ratings are at B+/B1 corporate and BB-/Ba3 on the term loan, with a 2 recovery rating.
The transaction, which was announced in December, is valued at about $8.7 billion, which represents a 9.1x multiple of PetSmart’s adjusted EBITDA for the 12 months ended Nov. 2, according to the company.
Leverage is being marketed at 4.5x net secured, 6.3x net total, sources said.
The transaction includes an incremental facility of $800 million, plus the amount of voluntary prepayments of the TLB plus an unlimited amount up to net first-lien leverage at closing (including capital leases and borrowings under the ABL), subject to 50 bps MFN protection, sources noted.
The issuer is also seeking to put in place $1.9 billion of eight-year (non-call three) unsecured notes via a Barclays-led bookrunner group. A roadshow runs through next Thursday, for pricing thereafter.
The debt financing also provides for a $750 million asset-based facility.
The consortium, including funds advised by BC Partners, alongside several of its limited partners, including La Caisse de dépôt et placement du Québec and StepStone, will pay $83 per share in cash for PetSmart. Longview Asset Management, which owns or manages about 9% of PetSmart’s outstanding shares, has committed to vote in favor of the transaction and will participate in the consortium, retaining roughly one third of its current stake, the company said.
The sponsors, excluding Longview, will kick in up to $1.83 billion of equity; Longview will roll over approximately three million of its current shares, the filing notes.
The Phoenix-based retailer operates approximately 1,387 pet stores in the U.S., Canada, and Puerto Rico. – Staff reports