Citigroup and CIBC World Markets are shopping a seven-year, $350 million add-on "B" loan for Jarden Corp. to finance the cash portion of its $625 million acquisition of The Holmes Group.
Jarden already has an $850 million "B" loan, a $100 million term loan and a $200 million revolver. The new add-on is priced at LIBOR plus 2%, the same as the existing institutional debt, said a buyside investor. "[The deal] is relatively positive, but pricing seems relatively tight," he added. The institutional loan is quoted at 101-101 1/2, according to Markit. The majority of the debt was put in place last year to back the $745.6 million acquisition of American Household and is led by Citi and CIBC. The company also has $179.9 million of senior secured subordinated notes.
Jarden, which provides niche-branded consumer products, is paying $420 million in cash and 4.1 million shares of Jarden stock worth $205 million. Martin Franklin, chairman and ceo, speaking on a conference call with investors and analysts, explained the transaction was structured this way to keep Jarden's net debt-to-EBITDA ratio at 3.5 times to one. This ratio is also expected to fall to three times by the end of the year with excess cash used to pay down the "B" loan, which carries no prepayment penalty.
Ian Ashken, cfo of Jarden, noted that one of the advantages the company had in preparing the bank financing for the acquisition is that Holmes undertook a leveraged recap last year and favorably repriced its paper last month. "The Holmes business is a well known credit and has performed well for the market," he noted.
The recap provided an approximately $153 million dividend to owners Berkshire Partners and founder and ceo Jerry Kahn. It also retired $100 million of 9 7/8% bonds. The Holmes Group debt comprises a $333 million "B" loan, priced at LIBOR plus 2 3/4%, and a $90 million revolver. Credit Suisse First Boston and GE Capital lead the facility, which is being taken out as part of the acquisition. Berkshire has been invested in Holmes since 1997. Warburg Pincus invested $350 million of equity into Jarden in connection with the American Household acquisition.