J.P. Morgan is close to wrapping up a new $190 million loan for San Antonio-based Eye Care Centers of America. The debt will partially fund the $450 million buyout of the optical retail chain by Hong Kong-based Moulin International Holdings--the largest eyewear manufacturer in Asia and the third largest worldwide--and San Francisco-based Golden Gate Capital. The company is also issuing $150 million of bonds.
The loan is split between a $25 million, five-year revolver at LIBOR plus 2 3/4% and a $165 million, seven-year "B" loan at LIBOR plus 3%. J.P. Morgan is the lead underwriter and Bank of America and Merrill Lynch are the co-managers, noted Douglas Shepard, executive v.p. and cfo of Eye Care. He said the company's largest investor Thomas H. Lee Partners thought the market conditions were correct to get the highest price possible.
Pro forma for the transaction, debt leverage increases to about 6.2 times from 5.1 times, as the company will add about $80 million of incremental debt, according to Standard & Poor's. However, the preferred stock held by Golden Gate has debt-like characteristics because of a put option that the company can exercise after four years and the potential that this could be refinanced with debt. If the debt-like preferred is included, the total debt to EBITDA is more like 7 times, S&P adds. The bank loan and bonds are rated B and CCC+, respectively.
Shepard said the biggest change could be the company's plans to do most of its sourcing from Asia. Currently, it buys a majority of its frames and lenses from U.S.-based distributors. Moulin will own the controlling 56% equity interest, with the two firms chipping in $163 million in equity contribution. He said the deal has a tentative closing date of Feb. 28. Eye Care was advised by Merrill Lynch and B of A. J.P. Morgan advised the Hong-Kong based buyers.
A J.P. Morgan spokesman and a B of A spokeswoman declined comment. Calls to Merrill Lynch and Golden Gate officials were not returned and a representative from Moulin could not be reached.