Merrill Lynch and Deutsche Bank pulled an initially planned $172 million senior subordinated notes due 2013 for HIT Entertainment, a London-based children's entertainment company, and brought a $172 million second lien to the market last week. It was expected to be priced at LIBOR plus 5 1/2%. The banks had launched the initial facility in July, with a six-year, $77 million revolver and a seven-year, $376.4 million term loan "B." Pricing on the revolver is LIBOR plus 2 1/4% and LIBOR plus 2 1/2% on the "B." The deal backs the leveraged buyout of HIT by Apax Partners. Moody's Investors Service assigned a B2 to the second lien.
One investor said a reason the banks gave for the move was the fact that British companies file semi-annual financials, rather than quarterly reports, which is what bond investors would be looking for. By doing a bank deal as opposed to a bond deal, the company could gain unofficial interim numbers for investors.
The rating agency affirmed a B1 rating to the term loan and the revolver. In its newest report, Moody's said the ratings continue to reflect the company's high leverage and competitive operating environment offset by its strong brand and anticipated growth. It went on to write that since the announcement of the transaction, the company modified its estimated year-end revenue and adjusted EBITDA by 4% and 3.5%. However, it writes that managment expects growth of about 7% between LTM April 2005 and the end of the year.
HIT television programming includes Barney & Friends; other popular characters include Bob the Builder and The Wiggles. The company also distributes videos, books and licenses merchandise. Calls to HIT and Apax were not returned.