Warner Music trims spread on $820 million delayed-draw loan, adds refi

By Sara Rosenberg

New York, May 3 - Warner Music Group Corp. reduced pricing on its $820 million first-lien delayed-draw covenant-light term loan (Ba3/BB-) due July 2020 to Libor plus 275 basis points from Libor plus 325 bps, according to a market source.

Also, the original issue discount on the new term loan was tightened to 99¾ from 991/2, the source said.

The loan still has a 1% Libor floor and a ticking fee of one-third of the spread from days 31 to 60, two-thirds of the spread from days 61 to 90 and the full spread after that. There is no ticking fee for the first 30 days.

The delayed-draw loan is split between a $710 million tranche and a $110 million tranche as they are expected to fund at different times due to timing of regulatory approvals.

Included in the loan is a springing maturity at July 2018.

With the pricing changes to the delayed-draw term loan, the company decided to launch a refinancing of its existing covenant-light term loan that will be sized at $492 million after a planned $100 million paydown, the source said.

Talk on the refinancing is Libor plus 275 bps with a 1% Libor floor and a par offer price, versus current term loan pricing of Libor plus 400 bps with a 1.25% Libor floor.

Existing lenders will be paid out at 101 for the repriced term loan amounts. No cashless rolls are available, the source said.

The delayed-draw term loan and the refinancing term loan have 101 soft call protection through Dec. 31, 2013.

Once all of the term loans are fully funded, they are expected to trade as a single tranche.

Commitments were due at 5 p.m. ET on Friday, the source added.

Credit Suisse Securities (USA) LLC, Barclays, UBS Investment Bank, Macquarie and Nomura are leading the financing.

Proceeds from the delayed-draw term loan will be used to fund the acquisition of Parlophone Label Group from Universal Music Group for £487 million (around $765 million) in an all-cash transaction and for general corporate purposes.

Closing is expected to occur mid-year, subject to regulatory approvals and a consultation procedure with employee representatives.

Warner Music is a New York-based music content company. Parlophone includes a range of recordings and classic and contemporary artists spanning a wide array of musical genres.

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