Investors looking to capitalize on a yield to call play have been buying the term loan "B" of Jean Coutu Group, with the understanding the loans will be taken out at par in about three to six months. The $1.1 billion term loan priced at LIBOR plus 2 1/2% and led by Deutsche Bank, Merrill Lynch and National Bank of Canada (LMW, 7/5/2004), was trading around 100 1/8 to 100 3/8 last Wednesday.
Its unsecured credit default swaps moved a little tighter and its loan-only credit default swaps dropped below 100 following the news, although it has not traded a lot. Two dealers said the LCDS was now trading in the 125-145 context. Its 8 1/2% bonds were trading between 93.94-94.50 Thursday, according to TRACE.
Rite Aid agreed to buy the Brooks and Eckerd stores from the Jean Coutu Group and has tapped Citigroup to lead the debt financing for the $3.4 billion acquisition. Rite Aid will assume $850 million of Jean Coutu's existing 8 1/2% senior subordinated notes (CIN, 8/25). A call to a representative at Jean Coutu was not returned.