Michaels Stores' $2.4 billion term loan backing Bain Capital and The Blackstone Group's leveraged buyout of the retailer broke into the secondary market last Monday. The term loan broke at 100 3/8-5/8, traded a little stronger at 100 5/8-3/4, before settling back to the 100 3/8-5/8 context.
A buyside trader said the deal was very active on its break, with at least eight dealers trading in the name. His own shop passed on the credit, however, because of its low rating. "It is a low B-rated name. If it were downgraded it would be in the triple C range," said the dealer. Moody's Investors Service assigned a B2 to the term loan, reflecting the company's high leverage, low fixed charge coverage and minimal free cash flow. Also reflected in the rating is the company's aggressive financial policy, which diminishes financial flexibility for the benefit of shareholders. Standard & Poor's rates the term loan B-.
Deutsche Bank, Bank of America, JPMorgan and Credit Suisse lead the credit, which also includes a $1 billion asset-based revolver. Pricing is LIBOR plus 3% on both tranches (CIN, 10/13). The term loan was flexed down 25 basis points, said the trader. A call to Lisa Klinger, treasurer, was not returned.