Duane Reade's $155 million term loan allocated last week and has since traded in the 101 1/2102 context, dealers said. Bank of America and Credit Suisse First Boston lead the loan, which backs Oak Hill Capital Partners' $700 million acquisition of the drugstore chain. The six-year term loan is priced at LIBOR plus 3 1/4%.
The financing also includes $195 million of senior subordinated notes and $245 million in equity. The bonds priced at 9 3/4%. Duane Reade's four-year, $250 million revolver is not trading. Banks are going to hold it because it is well secured and they are comfortable with the risk, a trader said. Approximately $150 million of the revolver has been drawn.
Total debt-to-EBITDA is 8.7 times following the acquisition. The company is highly leveraged and will slowly grow out of that as their profitability improves, but it will be a slow process, commented Diane Shand, an analyst with Standard & Poor's (LMW, 7/9). A Duane Reade spokeswoman and an Oak Hill official did not return calls.