Goldman Sachs and UBS are rounding up accounts for the bank debt backing Thomas H. Lee Partners' $1.1 billion acquisition of Simmons Co. from Fenway Partners. The facility consists of a six-year, $75 million revolver and an eight-year, $405 million institutional term loan. Price talk on the revolver and term loan is LIBOR plus 21Ž2% and LIBOR plus 23Ž4-3%, respectively. The company also plans to offer $350 million of senior subordinated notes, a banker said.
Simmons is a classic "growth LBO" candidate, according to Scott Schoen, managing director of Thomas Lee. "[It is the] fastest-growing player in a branded consumer segment that has grown at 6% a year for the last 20 years. [The] company dominates the premium end of the segment," Schoen added. "[It is] widely acknowledged to have the best management team in the bedding industry." Fenway acquired the bedding company from Investcorp for approximately $513 million in October 1998. Investcorp will retain a 10% stake in Simmons after the transaction closes.
One buysider said he was not completely overwhelmed by the deal with the total leverage, estimated at 6.25 times, a factor. "That's some hefty leverage," he said. Another buysider said the deal is too tight for the rating. "It's probably fair in terms of where they are in the market," he added. "But if you're not getting paid enough for the risk why do it?" The commitment level could not be determined by press time. The facility is rated B2 by Moody's Investors Service and B+ by Standard & Poor's. The proceeds from the loan and notes will be used along with $8 million in revolver borrowings and other debt, a $330 million common equity contribution and $65 million in rollover equity from management and the existing sponsors to fund the acquisition and refinance most of Simmons' debt. Deutsche Bank is the admin agent on the deal.