An $820 million senior secured credit facility backing the acquisition of ADVO by Valassis Communications, led by Bear Stearns, came to market Thursday. The deal consists of a $120 million revolver, a $540 million term loan and a $160 million delayed-draw term loan. Pricing could not be determined.
The companies announced the initial merger agreement in July, valuing ADVO at approximately $1.3 billion, or $37 per share. On Aug. 30, Valassis sued ADVO to rescind the agreement, with complaints ADVO provided Valassis with "materially false financial information" and "withheld material information." The two amended the merger agreement in December, which now values the transaction at $1.2 billion, or $33 per share, including about $125 million of ADVO's debt.
Moody's Investors Service downgraded Valassis' corporate family rating to B1 from Ba1 and assigned a Ba2 rating to the proposed credit facility. The downgrade reflects a significant increase in debt to EBITDA leverage from 2.6 times to 6.2 times with new debt from the acquisition. Standard & Poor's removed the company from CreditWatch, lowered its corporate credit rating to B+ from BB and assigned the new bank loan a BB- with a 1 recovery rating. The company also has $160 million in existing senior unsecured convertible notes due 2033 and $100 million of senior unsecured notes due 2009. S&P lowered its ratings on the debt one notch to BB-.
Headquartered in Livonia, Mich., Valassis provides promotional and advertising products. ADVO is a direct mail media company based in Windsor, Conn. Calls to spokeswomen at Valassis and ADVO were not returned.