Jack in the Box completed a new $350 million credit with a reverse price flex and an increase to its first-ever $150 million "B" loan. Hal Sachs, v.p. and treasurer, said the company originally planned for a $125 million, four-and-a-half-year "B" loan priced at LIBOR plus 31/2%. But the tranche was increased to $150 million with a spread of 31/4% over LIBOR. There is also a $200 million revolver priced at LIBOR plus 21/4%, he added. Sachs said 11 banks including lead Wachovia Securities signed into the three-year pro rata piece. The deal replaces a $175 million credit that was due to expire this year.
Sachs explained that the company was in no hurry to get the facility refinanced, taking its time to look at banks and plan the terms it wanted. He added that the previous line was a 1998 deal priced at LIBOR plus 5/8%, so Jack in the Box did not mind holding onto the more tightly priced revolver a bit longer. Sachs explained that Jack in the Box wanted the banks to assess the best structure and terms in their proposals, rather than have the company specifically cite what it was looking for to the banks. "We wanted them to come to us with what they thought was in the best interest of the company," he added. Wachovia came to the table with the most appropriate proposal for the company, he noted. He declined to name the other banks that bid for the business.
The San Diego-based hamburger fast food chain is using the facility to fund general corporate purposes, including letters of credit, working capital, capital expenditures and to refinance existing debt. Some of the proceeds will also be put toward costs associated with the company's recent purchase of Qdoba Restaurant Corp. The senior facility is secured by certain property and has a springing lien that would require additional security, Sachs noted. "This is the first 'B' loan that I can remember," he said of the credit. "I think that market terms today dictate the need for an institutional piece," he said.