April 28, 2020 / 1:45 PM / a month ago

US Foods offloads US$300m acquisition-linked loan to Guggenheim – sources

NEW YORK, April 28 (LPC) - Food distribution company US Foods has offloaded a US$300m term loan to Guggenheim Investments after the asset manager offered to pick up the entire portion of debt that had launched into the syndicated market just days earlier, according to two sources familiar with the transaction.

After unveiling the terms of the financing on April 24, US Foods’ five-year loan was withdrawn from syndication on Monday after Guggenheim took on the debt via a private placement, the sources said.

The US$300m loan is part of a financing package supporting US Foods’ US$970m acquisition of Smart Foodservice Warehouse Stores from private equity firm Apollo Global Management. The company announced that it closed the acquisition in a press release on April 24. On the same day, US Foods raised the rest of the debt for the acquisition from the high-yield bond market, according to Refinitiv data.

The terms of the privately placed loan were not available. However, US Foods is expected to pay a higher interest rate for the debt compared to the margin that it shopped in the syndicated loan market.

US Foods’ loan was offered to investors in syndication at a rate of 325bp over Libor with a 50bp step-up in pricing for each year of the loan, a third source familiar with the deal said. Citigroup, which was mandated to arrange the bond and loan sales, had also proposed the US$300m deal at a steep discount ranging from 92-93 cents on the dollar.

A spokesperson for Citi declined to comment. Spokespersons for US Foods and Guggenheim Investments were not immediately available to comment.

OPENING UP

US Foods’ first-lien term loan was only the second deal supporting a specific acquisition to hit the US syndicated market since the final week of February, according to Refinitiv LPC data. The coronavirus outbreak has left companies scrambling to bolster liquidity, and prudent investors have moved to protect their portfolios, leaving little appetite to stomach new event-driven financings, such as mergers and acquisitions.

Just six transactions have cleared syndication throughout April, and five of them were for borrowers in need of extra cash to get through the economic slowdown caused by the pandemic.

“Companies have been hunkering down and trying to understand their balance sheet and tap into credit facilities to makes sure they have cash available,” said Rusty Wiley, chief executive officer of Datasite, a software services provider and data firm. “As credit markets continue to stabilize, there are a fairly high number of deals for quality assets that will go out to market.”

Indeed, mobile phone network T-Mobile launched a US$4bn term loan into syndication on Monday. The seven-year investment grade loan is the final piece in T-Mobile’s US$23bn acquisition of peer Sprint Corp. Earlier this month, T-Mobile raised a mammoth US$19bn in the investment grade bond market to fund the purchase. (Reporting by Aaron Weinman. Editing by Michelle Sierra and Kristen Haunss.)

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