Goldman Sachs and UBS have added an eight-and-a-half year, $140 million senior unsecured floating-rate note to the financing backing Thomas H. Lee Partners ' $1.1 billion acquisition of Simmons Co. from Fenway Partners . The debt consists of a six-year, $75 million revolver of which only $8 million will be drawn; an eight-year, $405 million "B" loan and $200 million of subordinated notes. The bond offering was reduced by $140 million. Price talk on the floating-rate piece and term loan is LIBOR plus 3 3 Ž 4 % and LIBOR plus 2 1 Ž 2 -3%, respectively. A reverse flex is likely, a banker said. CIT and GE Capital have signed on to the revolver, the banker added, with the deal expected to close this week.
Several other deals this year have used floaters similar to this. A $135 million floating-rate piece was used in the financing of Thomas Lee's acquisition of Michael Foods (LMW, 11/17). From the issuer's perspective, the floating-rate note is more attractive than a standard fixed-rate bond and has much more attractive call flexibility, a banker said. But it is unsecured and is junior in the capital structure to other loans. "Astute issuers like TH Lee are going to take advantage of it," he added. "When they've got a business plan that calls for deleveraging [they] want to have debt with the least call protection."
The Simmons floating-rate debt has call protection of 103, 102, 101 for the first three years, the banker stated. The bond has a seven-year non-call. "We've certainly seen a number of unsecured deals done this year that have been bought by term loan investors," he added. Officials at Thomas Lee did not return calls.