J.P. Morgan is set to lead a $680 million credit for Advance Auto Parts to fund the acquisition and merger of Discount Auto Parts and refinance existing credit lines. Credit Suisse First Boston and Lehman Brothers are co-arrangers on the loan. A banker familiar with the deal noted the old $465 million loan, arranged in 1998 led by Chase Manhattan Bank and Donaldson, Lufkin & Jenrette, had a six-year maturity.
The new credit is composed of a five-year, $150 million revolver, which carries a 50 basis points commitment fee and a five-year, $165 million term loan "A." The pro rata portion has a spread of LIBOR plus 3%. The $365 million, six-year term loan "B" is priced at LIBOR plus 31/ 2%. Pricing on the previous loan was LIBOR plus 21/ 4% and $285.3 million was outstanding under the bank loan. Discount Auto Parts has a $265 million line led by SunTrust Bank.
In a conference call, discussing second quarter earning results, Larry Castellani, ceo of Advance, said the acquisition leaves Advance credit neutral. Moody's Investors Service rates Advance's bank debt Ba3. Castellani also looked to the record number of vehicles entering the aftercare arena, the downturn in the new sales market and the record number of miles being driven than ever before. J.P. Morgan acted as the financial advisor on the transaction to Advance.