(Corrects Moody's new first-lien rating to B3 from Caa1)
By Natalie Wright and Michelle Sierra
NEW YORK Oct 31 Warehouse retailer BJ's
Wholesale Club is tapping the wide open credit markets
for the second time in slightly over 12 months to finance a
distribution to its shareholders, sources told Thomson Reuters
The company is currently in market with a $2.1 billion
credit facility that will replace and increase an existing
$1.625 billion credit and back a $450 million dividend
recapitalization. Deutsche Bank is leading the transaction.
Citigroup, Barclays, Jefferies and Morgan Stanley are also
lenders in the deal.
Deutsche Bank declined to comment. BJ's did not return a
call for comment by press time.
The $450 million dividend comes on the heels of a $643
million distribution the company offered to shareholders in
September 2012. It also follows recent debt-financed dividends
that companies such as Arby's and Pacific Architects & Engineers
have used to funnel money to shareholders in recent days given
the limited opportunities to monetize investments that result
from a sluggish mergers and acquisitions market.
"The sponsors are finding a way to extract equity," said
Charles O'Shea, vice president and senior analyst at Moody's
Investors Service. "They're taking advantage of the low interest
rate environment where investors are looking for yield."
On the dividend recap, Moody's downgraded BJ's corporate
credit ratings to B3 from B2. Moody's assigned a B3 to BJ's new
first-lien term loan, and a Caa2 to the company's new
second-lien term loan.
The Standard & Poor's issuer credit rating is B-. First-lien
ratings are B- and second-lien ratings are CCC.
The company plans two tack-on loans to an existing $1.625
billion credit that it entered in September 2012 to back the
first dividend recapitalization. The facilities included a $1.3
billion first-lien loan and a $325 million second-lien loan.
A $150 million first-lien tack-on loan will increase the
existing first-lien to $1.45 billion. A $325 million second-lien
tack-on loan will double the existing second-lien term loan to
The new $1.45 billion, six-year first-lien term loan is
guided at LIB+375-400, with a 1 percent Libor floor, at 99.5. It
is expected to carry 101 soft call protection for six months.
Price talk on the $650 million, 6.5-year second-lien term
loan is LIB+775-800, with a 1 percent Libor floor, at 99. Call
protection on the second-lien term loan is set at 103, 102, 101.
The new term loans are expected to be covenant-lite.
The first-lien term loan will mature September 26, 2019, and
the second-lien is set to mature March 31, 2020. This is in line
with the maturity dates of the $1.625 billion credit.
Commitments are due November 8.
In February, BJ's repriced its existing $1.3 billion
first-lien term at a spread of LIB+325, with a 1 percent Libor
floor, at par value. The $325 million second-lien term loan
priced in September 2012 at a spread of LIB+850, with a 1.25
percent Libor floor, at 99.
Headquartered in Westborough, MA, BJ's Wholesale Club
operates membership warehouse clubs in the Eastern United
States, with 200 Clubs in 15 states from Maine to Florida.
The company announced its acquisition by private equity
firms Leonard Green & Partners and CVC Capital Partners in 2011.
(Editing By Jon Methven)