Bank of America and Lehman Brothers teamed up to launch syndication of a $775 million senior secured credit facility for Sonic last Tuesday. The deal consists of a five-year, $100 million revolver and a seven-year, $675 million term loan. Price talk is LIBOR plus 1 3/4% for the revolver and LIBOR plus 2-2 1/4% on the term loan, according to a banker.
"The issue is whether or not the company can handle the leverage," said an investor looking at the deal. Leverage after the loan will be around 4.4 times. "The business seems to be very good and I like the pricing at 225-250, but below 200 I start liking it less and less."
The facility will finance Sonic's recently authorized Dutch auction tender offer of $560 million and also refinance existing debt. The company last tapped the market for a $125 million revolver, also led by B of A, in 2003. Moody's Investors Service rated both tranches of the new facility, as well as assigned a corporate family rating, of B3.
Sonic, based in Oklahoma City, operates and franchises the largest chain of drive-in restaurants in the United States. Calls to Stephen Vaughan, cfo, were not returned.