Burlington Coat Factory's $900 million term loan traded under par in the aftermarket last week, stifled by pricing judged to be ungenerous at best. The term loan broke at par, trading up to 100 1/8 before falling to 99 7/8. The 2 1/4% spread over LIBOR was on the low end of the expected range. Bank of America and Bear Stearns lead the deal, which backs Bain Capital's $2.06 billion acquisition of Burlington. A spokeswoman for Bain Capital declined to comment on the trading level of the loan.
The deal was originally structured to include a $775 million term loan, an $800 million revolver and $500 million of high-yield bonds. To take advantage of the more favorable rate on the loans, $125 million was shifted to the term loan from the bond component. But there was not enough demand from investors, causing chunky selling on the loan when it broke in the secondary.
The bond portion now consists of $375 million in eight-year senior unsecured notes: $300 million at 11.8% and $75 million at 14.5% but with a two-year interest rate deferral. Moody's Investors Service changed the proposed rating on the notes to Caa1 from B3. The lower rating reflects the large amount of secured debt above the notes.