Deutsche Bank's $600 million "B" term loan for Commonwealth Brands is said to have gathered more than $500 million in commitments, after investors were offered a 1/4% upfront fee on the tranche. That enticement follows a 1/2% price flex from LIBOR plus 31/ 2% to LIBOR plus 4%. The credit facility also includes a $17 million revolver, which will satisfy Commonwealth's small capital expenditure requirements. A Deutsche Bank spokesman could not confirm the details by press time.
Proceeds of the deal are set to go to former owner Brad Kelley, who sold the Bowling Green, Ky., discount cigarette manufacturer to Houchens Industries last year, according to one buysider. This is in addition to a $400 million payout he has already received. Kelley also is expected to rake in even more through a payout formula of six times 2002-2003 EBITDA minus $1.2 billion, the investor noted.
An approximately $200 million high-yield bond deal was planned by Commonwealth, but this was shelved in favor of a private placement. Kelley is the investor putting up the money, which will receive back about 11% interest. "At least it shows he really supports the company," the investor noted, adding that the discount cigarette business is obviously a fairly lucrative industry. John Poling, ceo and cfo of Commonwealth, did not return calls.