The $2.25 billion covenant-lite term loan for J.C. Penney advanced to bracket 102 after breaking for this afternoon at 100.75/101.25, versus issuance at 99.5, according to sources. The five-year loan is priced at L+500, with a 1% LIBOR floor, and carries 102, 101 call premiums.
At 99.5, the loan yields 6.26% to maturity. The yield narrows to 5.89% at the midpoint of the opening market.
Prior to allocating the deal, Goldman Sachs, Barclays, J.P. Morgan, Bank of America Merrill Lynch, and UBS firmed the spread on the loan at L+500, the tight end of a revised L+500-525 range.
Goldman Sachs, Barclays, J.P. Morgan, Bank of America Merrill Lynch, and UBS arranged the transaction. The deal is secured by real estate and other company assets.
Corporate ratings are CCC+/Caa1. The term loan is rated B-/B2, with a 2 recovery rating from S&P.
As reported, the arrangers yesterday upsized the loan by $500 million while cutting pricing from earlier guidance of L+575, with a 1% LIBOR floor and a 99 offer price, sources said.
Proceeds are available for working capital and general corporate purposes, which could include to “acquire or satisfy and discharge” the company’s outstanding 7.125% notes due 2023, according to the company.
On April, 15, J.C. Penney announced that it drew down $850 million from a $1.85 billion asset-based revolver due 2016 to fund working-capital requirements and capital expenditures, including the replenishment of inventory levels. The revolver was arranged by J.P. Morgan, Bank of America Merrill Lynch, Barclays, and Wells Fargo. Pricing on the revolver is tied to a ratings-based grid ranging from L+150-300, with a commitment fee ranging from 25-50 bps. Based on J.C. Penney’s CCC+/Caa1 ratings, all-in pricing appears to open at L+350. – Kerry Kantin/Chris Donnelly