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Pabst to be acquired by Russia’s Oasis Beverages, PE firm TSG nets minority stake

pabst2UBS is leading the debt financing that will back the acquisition of Pabst Brewing Company by Oasis Beverages, according to sources. Private equity firm TSG Consumer Partners will take a minority stake in the business. No other details of the acquisition or the financing were disclosed.

Oasis is a beer and beverage company with operations in Russia, Ukraine, Kazakhstan, and Belarus. Current Oasis chairman and founder Eugene Kashper will serve as the CEO of Pabst.

Current owner C. Dean Metropoulos & Co. acquired Pabst in 2010 from Kalmanovitz Charitable Foundation for $250 million, according to S&P Capital IQ.

Pabst Brewing’s portfolio includes iconic brands such as Pabst Blue Ribbon, Lone Star, Rainier, Ballantine IPA, Schlitz, Old Style, Stroh’s and Old Milwaukee. The company was founded in 1844 and is based in Los Angeles, Calif. – Staff reports

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Burger King nets financing for Tim Hortons merger

burgerkingBurger King Worldwide has obtained commitments for $12.5 billion of financing to fund the cash portion of its merger with Tim Hortons, including a $9.5 billion debt financing package led by JP Morgan and Wells Fargo, the company announced.

The debt financing for the transaction, which was unveiled today, will consist of a $6.75 billion TLB, a $500 million revolving credit, and senior secured second-lien notes in the amount of $2.25 billion. In addition, Berkshire Hathaway has committed $3 billion of preferred equity financing. Berkshire is simply a financing source and will not have any participation in the management and operation of the business, sources said.

Burger King has roughly $685.6 million outstanding under its current TLB due 2019 and $965.6 million under its TLA due 2017, part of its $2.8 billion of long term debt, sources said.

The transaction is subject to customary closing conditions, including approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the U.S. Since 3G Capital already owns approximately 70% of the shares of Burger King and has committed to vote in favor of the combination, no shareholder vote is required of Burger King shareholders.

The merger will create a quick service restaurant company with roughly $23 billion in system sales and over 18,000 restaurants in 100 countries. Following the closing of the transaction, each brand will be managed independently.

Under the terms of the transaction, which has been unanimously approved by each company’s Board of Directors, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 common shares of the new company per Tim Hortons share. Based on Burger King’s unaffected closing stock price on Aug. 22, 2014, this represents total value per Tim Hortons share of C$89.32, and based on Burger King’s closing stock price on Aug. 25, 2014, this represents total value per Tim Hortons share of C$94.05. As an alternative to the default mixed transaction consideration described above, each Tim Hortons shareholder will have the ability to elect to instead receive, for each Tim Hortons share held, either C$88.50 in cash; or 3.0879 common shares of the new company, in each case subject to pro ration.

The C$89.32 unaffected offer value represents a premium of 39% based on the volume weighted average price of Tim Hortons stock over the past 30 days ending Friday Aug. 22, 2014, and a 30% premium based on Tim Hortons closing stock price on Aug. 22, 2014.

3G Capital will retain all of its investment in Burger King by converting its roughly 70% equity stake in Burger King into equity of the new company. On a pro forma basis, 3G Capital is expected to own approximately 51% of the new company with the balance of the common shares to be held by current public shareholders of Burger King and Tim Hortons.

Upon completion of the transaction, each outstanding common share of Tim Hortons will be converted into the right to receive C$65.50 in cash and 0.8025 of a common share of the new parent company, which is subject to the right of the holders of Tim Hortons common stock to make elections as noted above. Upon completion of the transaction, each outstanding common share of Burger King will be converted into 0.99 of a share of the parent company and 0.01 of a unit of a newly formed Ontario limited partnership controlled by the new parent company, however, holders of shares of Burger King common stock will be given the right to elect to receive only partnership units in lieu of common shares of the new parent company, subject to a limit on the maximum number of partnership units that can be issued.

Shares of the new parent company will be traded on the New York Stock Exchange and the Toronto Stock Exchange, and units of the new partnership will be traded on the Toronto Stock Exchange. The partnership units will be convertible on a 1:1 basis into common shares of the new parent company, however, the units may not be exchanged for common shares for the first year following the closing of the transaction. Holders of partnership units will participate in the votes of shareholders of the new parent company on a pro-rata basis as though the units had been converted. 3G Capital has committed to elect to receive only partnership units.

The transaction is expected to be taxable, for U.S. federal income tax purposes, to the shareholders of Burger King, other than with respect to the partnership units received by them in the transaction. The transaction is expected to be taxable to shareholders of Tim Hortons in the U.S and Canada. – Chris Donnelly

 

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Charter sets meeting tomorrow to launch $7.4B of leveraged loans for M&A, 3-part with Comcast and Time Warner

charter_communications_logoCharter Communications is launching $7.4 billion of incremental institutional term loans via a lender meeting tomorrow at 2:00 pm EDT, sources said. The funding will come as new tranche G and H loans, which are expected to have different maturities, the sources added.

Goldman Sachs, Bank of America Merrill Lynch, Credit Suisse, and Deutsche Bank have underwritten term debt totaling up to $8.4 billion and a $500 million revolver in connection with Charter’s purchase of certain assets of Comcast Corp. The remaining $1 billion of that commitment will be a $1 billion revolver that’s not on offer to the market, sources noted.

The cable operator has in place a $1.5 billion TLE due 2020 and a $1.2 billion TLF due 2021, both of which are priced at L+225, with a 0.75% LIBOR floor.

In April, Charter and Comcast announced a three-part plan that would grow Charter’s subscriber base and help with regulatory hurdles for Comcast’s $45 billion acquisition of Time Warner Cable.

According to regulatory filings, following the completion of Comcast’s merger with Time Warner Cable, Charter will acquire roughly 1.4 million existing Time Warner Cable subscribers, increasing its video customer base from 4.4 million to roughly 5.7 million and making Charter the second largest cable operator in the U.S.

Charter and Comcast also agreed to transfer assets involving roughly 1.6 million former Time Warner customers and 1.6 million Charter customers in a tax-efficient exchange, improving the geographic presence of both companies. Additionally, Comcast will spin off a new entity composed of cable systems serving roughly 2.5 million Comcast customers to its shareholders, with Charter acquiring approximately 33% of the equity of the spin-off in exchange for 13% of the equity of a new holding company of Charter.

The three-part plan is contingent upon completion of the Comcast and Time Warner merger. – Staff reports

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KeyCorp buys middle market investment bank Pacific Crest

keyIn a drive to become the leading middle market corporate and investment bank, KeyCorp said it acquired Pacific Crest Securities.

Pacific Crest Securities, which is a technology-focused investment bank and capital markets firm, will become part of KeyBanc Capital Markets. The transaction is expected to close in the third quarter if regulators approve the deal.

Pacific Crest Securities, based in Portland, Oregon, employs 170 and has expertise in internet and digital media, software and systems, communications, semiconductors, and clean technology. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more

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July 2014 European Leveraged Loan Market Analysis – Video, Slides

This is S&P Capital IQ’s monthly loan market update. In this post, we concentrate on the trends at work in the European leveraged loan market during 2014 so far, including an increase in M&A financing and some signs of heating in the market. We’ll also touch on the question of whether some slowdown is to be expected.

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Out of the €45 billion of leveraged loan issuance so far this year, M&A-related deals contributed €25 billion, more than double what was raised in the first half of last year. This total was boosted by some jumbo corporate M&A deals, most recently  the cross-border financing for Jacobs Douwe Egberts. Among sponsor-backed buyouts, LCD tracked an increase in the number of asset sales by corporates and families, bringing some welcome debut borrowers to the loan market.

Eur2ELLI

Institutional investors continued to show strong appetite for leveraged loans during the second-quarter, and heavy repayments on existing loans spurred them on. In fact repayments reached a record quarterly high of €16.6 billion, based on the S&P European Leveraged Loan Index, as the chart shows.

eUR3-CLO

Adding to institutional demand, there was lively issuance of new-generation CLOs, particularly during June, including some new managers entering the 2.0 market, and sources say the pipeline for further CLO issuance in the second half of the year looks healthy.

eur4EBITDA

Through much of the year so far, there has been relatively little complaint from buyside firms about leverage multiples, and indeed first-lien leverage is pretty much flat on last year at around 3.7 times EBITDA. But second-lien tranches are appearing more frequently, and this helped drive total leverage a little higher, to 4.9x. Some arrangers argue leverage is unlikely to spiral up and up because this would result in deals coming to market with low single-B ratings, these often being hard to shift in syndication.

eur5covlite

Instead, the market is showing its aggression in other ways – particularly in the use of covenant-lite loans. €10 billion of cov-lite paper – a record – has been raised this year, meaning that roughly one in three euros sold to fund managers had no maintenance covenants. The ELLI Index now includes a 13% cov-lite portion, the highest in its history – although a long long way behind the U.S., where the trend started.

EUR6

However, from the point of view of yields, Europe looks less aggressive than it did earlier in the year as this chart suggests. Behind the scenes, yields on domestic European deals were flat from the first quarter to the second. But in line with the weaker technical picture in the U.S. market, cross-border yields widened in recent months, dragging the average out too.

Looking ahead, some kind of summer slowdown is likely, but arrangers say they are pitching on some aggressively structured deals and will be looking out for signs of pushback among investors if terms get too heated.

 

The video is available here.

The URL for the video:

PDF slides of the video on Slideshare is available here.

URL for the slides:

While you’re on YouTube please subscribe to LCD’s YouTube Channel. That way you won’t miss any LCD videos. You can also subscribe by clicking on the link to the right of any LCD News email.

– Ruth McGavin

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Sprint eyes roughly $20B bridge loan to back bid for T-Mobile

sprint logoSprint has obtained commitments from several banks providing a roughly $20 billion bridge loan to back the company’s effort to acquire T-Mobile, sources said. The banks will launch the deal soon, sources added.

Earlier this week, reports emerged regarding Sprint’s interest to purchase rival wireless provider T-Mobile in a deal that would total $32 billion. SoftBank, which completed its roughly $21.6 billion acquisition of Sprint in July 2013, would hold a controlling interest in the combined company.

S&P earlier this week disclosed that Sprint’s rating would likely be no higher than BB- after the merger and that SoftBank’s ratings would be lowered to BB, from BB+. S&P expects SoftBank’s consolidated debt to EBITDA – consolidating Sprint and T-Mobile, and including the acquisition and spectrum auction cash requirements – would be around mid-5x or higher in fiscal year 2014 annualized, which is above the current 5x threshold for SoftBank’s current rating. Sprint is currently rated BB-/Ba3.

Regulatory hurdles, though, could be an issue for Sprint. In a report earlier this week, S&P said that the combination of Sprint and T-Mobile would face intense regulatory scrutiny and wouldn’t be approved by the FCC and Department of Justice. In 2011, the FCC rejected AT&T’s $39 billion bid to acquire T-Mobile, suggesting that it wanted to maintain four nationwide wireless carriers. Sprint’s acquisition of T-Mobile would leave the U.S. with three national carriers. – Richard Kellerhals

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Gates Global on deck for tomorrow with cross-border LBO loan

A Credit Suisse-led arranger group has scheduled a bank meeting for 10:00 a.m. EDT tomorrow, June 5, to launch a cross-border loan package backing the Blackstone Group’s purchase of industrial manufacturer Gates Global, according to sources.

The loan financing includes a $2.49 billion term loan, a €200 million ($272 million) term loan, a $125 million cash-flow revolver, and a $325 million asset-based RC. The seven-year term loans will be covenant-lite. The revolvers will mature in five years.

Credit Suisse, Citigroup, Morgan Stanley, Goldman Sachs, and Deutsche Bank, UBS, and Macquarie are arranging the transaction, while Citi will be left lead on the adjoining bond deal.

Commitments on the loan will be due on Thursday, June 19, sources added.

Blackstone in early April agreed to acquire Gates for $5.4 billion. Gates, which makes transmission belts and fluid-power products, is a division of global engineering firm Tomkins/Pinafore, which Onex Corp. and the Canada Pension Plan Investment Board jointly acquired in 2010 for roughly $5 billion.

For reference, Pinafore currently has roughly $1.3 billion outstanding under its B loan, according to a regulatory filing. –

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Ortho-Clinical $2.175B loan backing Carlyle Group LBO rises atop par on entering trading

ortho_lgAccounts this morning received allocations of the $2.175 billion B term loan for Ortho-Clinical Diagnostics, which advanced to 100.375/100.875 after breaking for trading at 99.25/100.25, from issuance at 99, according to sources. The seven-year loan is priced at L+375, with a 1% LIBOR floor. Proceeds from loan, along with a $1.3 billion issue of 6.625% notes due 2022, will be used to fund The Carlyle Group’s purchase of the laboratory instruments and diagnostic products business from Johnson & Johnson. Barclays, Goldman Sachs, Credit Suisse, UBS, and Nomura arranged the loan. The loan cleared wide of original talk, among other investor-friendly changes, though the adjoining bond deal was upsized by $150 million to reduce the sponsor’s equity check by a like amount. A $350 million, five-year revolving credit rounds out the financing. Terms:

Borrower Ortho-Clinical Diagnostics
Issue $2.175 billion B term loan
UoP LBO
Spread L+375
LIBOR floor 1.00%
Price 99
Tenor seven years
YTM 5.02%
Call protection 12 months 101 soft call
Corporate ratings B/B2
Facility ratings B/B1
S&P recovery rating 3
Financial covenants none
Bookrunners Barc, GS, CS, UBS, Nom
Admin agent Barc
Sponsor Carlyle
Price talk L+350/1%/99-99.5
Notes Ticking fee of 375 bps payable 31 days after allocations
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Avago $4.6B loan backing LSI acquisition enters secondary north of issue price

avago-technologies_200x200Accounts this afternoon received allocations of the covenant-lite $4.6 billion B term loan for Avago Technologies, which broke for trading at 100/100.5, from issuance at 99.5, according to sources. The seven-year loan is priced at L+300, with a 0.75% LIBOR floor. Deutsche Bank, Barclays, Bank of America Merrill Lynch, and Citigroup arranged the loan, which cleared tight to original talk. The publicly traded semiconductor manufacturer will use proceeds to support its $6.6 billion acquisition of LSI Corp. The senior secured financing also includes a $500 million revolver, while Avago is also planning to fund the deal with a $1 billion investment from Silver Lake Partners, which would be in the form of a seven-year 2% convertible note, with a conversion price of $48.04 per share or preferred stock. The company will also use $1 billion of cash from the combined balance sheet to fund the transaction. Terms:

Borrower Avago Technologies
Issue $4.6 billion B term loan
UoP Fund acquisition of LSI
Spread L+300
LIBOR floor 0.75%
Price 99.5
Tenor seven years
YTM (once funded) 3.89%
Call protection 12 months 101 soft call
Corporate ratings BB+/Ba2/BB+
Facility ratings BBB-/Ba1/BBB-
S&P recovery rating 2
Financial covenants none
Arrangers DB, Barc, BAML, Citi
Admin agent DB
Price talk L+325/0.75%/99
Notes Ticking fee of 150 bps kicks in on June 1, stepping to 300 bps July 1; includes a 24-month MFN sunset provision
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Men’s Wearhouse $1.1B loan backing Jos A Bank buy rises on entering secondary

menswearhouseThe $1.1 billion covenant-lite term loan for Men’s Wearhouse ticked to 99.625/100.125 after breaking secondary late this afternoon at 99.5/100, from issuance at 99, according to sources. The seven-year loan is priced at L+350, with a 1% LIBOR floor. J.P. Morgan and Bank of America Merrill Lynch arranged the deal, which cleared at the tight end of talk. Proceeds back the publicly traded retailer’s planned $1.8 billion acquisition of Jos. A. Bank. Since the deal isn’t expected to close until the third quarter, lenders will be paid a ticking fee of half of the drawn spread beginning in June; the fee steps up to the full drawn spread in July. The issuer is also putting in place a $500 million, five-year asset-based revolver. The financing for the merger is also expected to include a $600 million issue of unsecured notes, which have been bridged, SEC filings show. BAML is expected to be left lead on the bond deal. Terms:

Borrower Men’s Wearhouse
Issue $1.1 billion delayed-draw TLB
UoP Finance acquisition of Jos. A. Bank
Spread L+350
LIBOR floor 1.00%
Price 99
Tenor seven years
YTM 4.76%
Call protection 12 months 101 soft call
Corporate ratings B+/Ba3
Facility ratings B+/Ba2
S&P recovery rating 3
Financial covenants none
Arrangers JPM, BAML
Admin agent JPM
Price talk L+350-375/1%/99
Notes Ticking fee of 175 bps kick