The $3.4 billion financing backing the leveraged buyout of Michaels Stores was launched at a bank meeting last Wednesday at the New York Palace, kicking off what promises to be the beefiest deal calendar in recent memory. Led by Deutsche Bank, Bank of America, JPMorgan and Credit Suisse, the deal consists of a $1 billion asset-based revolver and a $2.4 billion term loan, according to a banker. Deutsche Bank is on the left for the term loan and B of A is on the left for the ABL. Price talk is LIBOR plus 3% on both tranches. "Michaels is the big one on the radar this week," one portfolio manager said.
Investors are sorting through the issues of lending to the retail sector. "They are really pushing the envelope in terms of structure and leverage," said one buysider looking at the credit. "They have huge leverage on that for glitter and sparkles, and crepe paper and crafts." Leverage is 4.5 times on the bank facility and 6.9 times total, according to a banker. Calls to a Michaels spokeswoman were not returned. Bankers at Deutsche Bank, B of A and CS declined comment.
Bain Capital and The Blackstone Group are paying approximately $6.164 billion for the arts and crafts retail chain (CIN, 7/7). The remainder of the transaction is being financed through a $700 million unsecured bridge loan facility and a $700 million of senior subordinated bridge loan facility. A banker said the leads went out with the bridge facility to some of the big accounts around Sept. 28, but declined to comment on which investors were involved. B of A led a deal for Michaels last November, which consisted of a five-year, $300 million revolver with an option to increase it to $400 million. It is priced at LIBOR plus 75 basis points (7/7).
Although Michaels may be the flavor of the week, investors are still very aware of the other October deals still to come, including Freescale Semiconductor and the jumbo deal for HCA. "Everyone is really getting antsy for it to come to market," the portfolio manager said.
