The $470 million refinancing credit for KinderCare Learning Centers was yanked from the market last week as the company and equity sponsor Kohlberg Kravis Roberts & Co. balked at proposed changes to the deal. "The reason we backed off on the credit facility was that the terms were not acceptable to the company," said Dan Jackson, cfo. He declined to discuss particulars, but KKR's reluctance to offer more than stock as security is believed to be the major sticking point. The company will instead go for a commercial mortgage backed securities deal. Officials at J.P. Morgan and Citibank, the leads on the bank deal, declined to comment. KKR officials declined to comment on the situation.
One banker following the deal said the stock security was the major sticking point. "Everyone was puking over the stock security," he said. "KKR had no intention of giving [more security] up." KKR traditionally secures its credits only with stock, so a push for more collateral would have bucked the firm's style, investors said (LMW, 3/10).The $350 million "B" credit was priced at LIBOR plus 31/4% with a 25 basis point up-front fee. Bankers said pricing changes were not extensively discussed.
"The markets have gotten choppy in the last couple weeks and we've seen a lot of issuers tapping alternative markets for financing," said another banker familiar with the situation, declining to comment further on the matter. Jackson would not comment on specific details regarding the CMBS deal, beyond the fact that it would take awhile to finalize after assessing all of the company's real estate. Jackson would not confirm if J.P. Morgan and Citi would be leading the new transaction.