Sonic Corp.'s $675 million term loan "B" broke at 100 1/4-100 1/2 in the secondary market last week. A dealer said trading was fairly active on the loan, which Sonic, a drive-in restaurant chain, will use to purchase shares of common stock and refinance some of its existing debt. Bank of America and Lehman Brothers lead the financing, which includes a $100 million revolver. The term loan "B" is priced at LIBOR plus 2%; price talk was originally LIBOR plus 2-2 1/4% (CIN, 8/18).
Standard & Poor's assigned a BB- rating to the term loan, reflecting its weak cash flow protection measures, lack of geographic diversity and its small market share. Sonic will be highly leveraged after the transaction; pro forma total debt to EBITDA will be 4.3 times in 2006, up from 1.1 times in 2005, according to the ratings agency's report. Stephen Vaughan, cfo, did not return calls.