J.P. Morgan and Deutsche Bank launched syndication last week for an $855 million facility refinancing Dr. Pepper/Seven Up Bottling Group's (DPSUBG) debt. The facility comprises a seven-year, $730 million "B" loan and a six-year, $125 million revolver. The term loan is priced at LIBOR plus 21/2%, while the revolver is priced at LIBOR plus 2% drawn or 1/2% undrawn.
One loan investor said he is probably going to commit to the deal because it is a stable business with a good management team. But he is concerned that the company is over-leveraged and does not have enough free cash flow. According to Moody's Investors Service debt-to-EBITDAR is more than 5.5 times. Free cash flow is about 5% of total debt, even though the company has increased cash flow available to pay down debt since it does not pay a dividend. DPSUBG was formed by The Carlyle Group, Cadbury Schweppes and Jim Turner, DPSUBG's ceo and president, in 1999. Carlyle owns 53% of the company, Cadbury Schwepps 40% and management 7%. Calls to DPSUBG officials were not returned.
J.P. Morgan is also leading a $775 million facility for Kinko's with Bank of America as the co-lead. The facility consists of a seven-year, $675 million "B" loan priced at LIBOR plus 23/4% and a $150 million revolver priced at LIBOR plus 21/2%. The facility will be used to pay a dividend to the company's sponsor Clayton, Dubilier & Rice. The deal had a very strong response from investors and moved quickly, a source said. Kinko's officials could not be reached.