NEW YORK, Feb 11 (LPC) - Consumer products manufacturer Edgewell Personal Care is poised to return US$600m to investors already flush with cash and lacking opportunities to redeploy capital to quench their thirst for yield.
Edgewell raised the debt to support a US$1.37bn tie-up with peer Harry’s Inc in September last year. The company has now backed away from the deal and is expected to repay lenders their allocated portions, three sources with knowledge of the deal said. Any secondary trades have been canceled.
Already this year, approximately US$15.6bn in institutional loan repayments had been returned to investors by the end of January, according to one portfolio manager’s estimates. During the same period, US$4.1bn in collateralized loan obligations were issued, according to Refinitiv LPC data.
The shaving company’s decision is a deep cut to investors that have been starved of new money opportunities in the US over the last three months. Institutional new money volumes ended 2019 at US$239bn, a 30% year-on-year drop, according to Refinitiv LPC data, as high valuations hindered dealmaking.
The dearth of mergers and acquisitions-related loans enabled Edgewell to leverage strong investor demand for the financing last September. The seven-year US$600m loan cleared at 300bp over Libor, after being guided at 300bp-325bp over the benchmark.
Participants on the loan can take solace in the ticking fees, or payments to lenders for a delay in closing an acquisition or loan agreement, they’ve accumulated over the last month.
Lenders have been receiving such fees since December 30, while the deal was under regulatory review, at a rate equal to 100% of the 300bp margin, plus Libor, according to two investors.
“The deal was highly vetted, and we’ve been getting paid as if the deal was happening since December 30,” one investor said. “To no longer have it is unfortunate, but at the same time it’s the right thing (for Edgewell) to do and get the full fee.”
The company also lined up commitments for a US$575m term loan A and a US$425m revolving credit facility from banks to support the purchase, but the unfunded debt will now lapse, the third source said.
Bank of America led the transaction for Edgewell. A spokesperson for the bank declined to comment.
THE FINAL CUT
Known for its Schick and Wilkinson Sword grooming products, Edgewell opted to terminate its agreement to absorb Harry’s on Monday after the Federal Trade Commission (FTC) moved to block the tie-up.
The federal agency said in a February 3 press release that a merger would have eroded competition in the shaving industry, which is dominated by two main suppliers including Edgewell, and could also potentially drive up consumer prices.
Harry’s has informed Edgewell that it intends to pursue litigation against the company for its decision to walk away from the deal, a move that Edgewell said has no merit, the company said in a press release on Monday.
A spokesperson for Edgewell did not respond to requests for comment. Harry’s Co-Founders and Chief Executive Officers Jeff Raider and Andy Katz-Mayfield said in an emailed statement that the merger with Edgewell would have benefited consumers and they believe the companies would have prevailed in the litigation.
Connecticut-headquartered Edgewell is the latest to succumb to regulatory pressure and terminate a merger agreement.
Last month, packaged food companies TreeHouse Foods and Post Holdings agreed to back away from a deal that would have seen TreeHouse sell its cereal business to Post after the FTC challenged the acquisition in December. (Reporting by Aaron Weinman. Editing by Michelle Sierra, Kristen Haunss and Jack Doran.)