Goldman Sachs and J.P. Morgan are preparing a $600 million "B" term loan for Pleasantville, N.Y.-based Reader's Digest Association, backing the $760 million cash acquisition of Reiman Publications. "The entire $760 million payment will be bank debt," said Michael Geltzeiler, senior v.p. and cfo for Readers Digest. "Readers Digest primarily chose to use bank loans to finance the acquisition as it enables us to use the free-cash flows of the combined business to reduce debt levels," said Geltzeiler. This should enable accelerated deleveraging, he said. "Based on the rather favorable interest-rate environment we're looking at LIBOR plus 21/ 2% to 3%," he noted.
The total loan size is $1.1 billion in committed financing with about $500 million pro rata, said one banker. This will also refinance the existing debt. He suggested the deal should do well, considering the strong name and credit profile. The loan is expected to be in the BB+ range. A date for the launch could not be determined. Officials at Goldman could not be reached. A J.P. Morgan spokesman did not return calls.