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Bonds News

U.S. Foodservice postpones LBO financing: sources

NEW YORK, June 26 (Reuters) - Ahold's AHLN.AS U.S. Foodservice has postponed the financing backing its $7.1 billion LBO by Clayton, Dubilier & Rice and Kohlberg Kravis & Roberts due to weak market conditions, sources told Reuters Loan Pricing Corporation on Tuesday.

It was not clear whether the two intend to finance their LBO by bridge loans that have been provided by Citigroup, Deutsche Bank, Goldman Sachs, J.P. Morgan, Morgan Stanley and RBS Securities.

U.S. Foodservice was in the process of raising a $3.36 billion bank loan and a $650 million high yield bond offering.

The decision to postpone comes as both the loan and high yield bond investors forced U.S. Foodservice to change the terms of the financing a number of times due to the large amount of debt being assumed by the company. Loan investors were also slow to commit to the deal as it lacked financial covenants.

On Monday the $500 million letter-of-credit tranche in the bank loan was combined with the $1.56 billion, seven-year term loan. Additionally, 101 call protection was added to the TLB.

Pricing on the TLB remains at LIBOR +275 and the facility is offered at 99.5.

Pricing on the deal was widened last week from original talk of LIBOR +250 soon after corporate family ratings of “B3” emerged.

On Monday the company downsized its $1.1 billion bond deal to $650 million. The entire bond deal is now a single, senior fixed-rate tranche due 2015 after the PIK toggle tranche and the senior subordinated tranche were dropped.

A $100 million, six-year revolver and a $1.2 billion, six-year ABL revolver fill out the rest of the bank loan. The ABL revolver is priced at LIBOR +125.

The sponsors are buying U.S. Foodservice, the second-largest broadline food service distributor in the United States, from Dutch company Royal Ahold NV.

((Reporting by Tom Ryan and Faris Khan; Reuters Messaging: tom.ryan.reuters.com@reuters.net; e-mail: tom.ryan@reuters.com; Tel 646-223-6826)) Keywords: RLPC USFOODSERVICE/

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