Collective plans $750 million term loan, $150 million revolver increase with Stride Rite buy

By Sara Rosenberg

New York, June 13 - Collective Brands Inc. (Payless ShoeSource Inc.) plans on getting an up to $750 million term loan and increasing its revolving credit facility by $150 million in connection with its acquisition of The Stride Rite Corp., according to a 10-Q filed with the Securities and Exchange Commission Wednesday.

Citigroup and JPMorgan are the lead banks on the deal.

The revolver will be upsized to $350 million from $200 million, with pricing expected to range from Libor plus 87.5 to 150 basis points, the filing said.

The revolver is expected to be undrawn at closing and will be available for general corporate purposes.

Under the transaction agreement, Payless is buying Stride Rite for $20.50 per share, totaling about $800 million, plus the assumption of Stride Rite debt.

The company plans to use about $200 million of cash on hand to help fund the acquisition.

The debt leverage ratio for the new company is expected to return to Payless' pre-transaction level within two to three years of the acquisition's consummation.

Concurrent with the closing of the acquisition, Payless will rename the combined footwear, accessories and lifestyle brand company Collective Brands, Inc., which, as a holding company, will operate three standalone business units - Payless, Stride Rite and Collective Licensing International.

Collective Brands and Payless will be based in Topeka, Kan., Stride Rite will be based in Lexington, Mass., and Collective Licensing will be based in Denver.

The transaction is expected to close in the third fiscal quarter of 2007, subject to customary closing conditions and regulatory approvals, as well as approval by Stride Rite shareholders.

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