Alliance Data locks up $2.29 billion five-year term loan and revolver

By Susanna Moon

Chicago, July 16 - Alliance Data Systems Corp. obtained a new $2,285,000,000 five-year credit facility, consisting of a $1,142,500,000 term loan and a $1,142,500,000 revolving credit facility.

The company closed the facility on July 10 with Bank of America Merrill Lynch, Wells Fargo Securities, LLC, SunTrust Robinson Humphrey, Inc., J.P. Morgan Securities LLC, Fifth Third Bank and RBC Capital Markets as co-lead arrangers and bookrunners, according to an 8-K filing with the Securities and Exchange Commission.

Interest on the loans is initially Libor plus 200 basis points, with a spread of Libor plus 125 bps to 200 bps based on leverage. The unused fee is 25 bps to 35 bps.

The rate on the term loan reflects "a slight improvement" from previous deals, according to a company press release.

The facility includes an uncommitted accordion feature of up to $500 million or, in some circumstances, up to $615 million.

Proceeds will be used to finance general corporate and working capital needs, including the refinancing of debt and the financing of acquisitions and other growth initiatives.

Wells Fargo Bank, NA is the administrative agent and letter-of-credit issuer. Barclay Bank plc, Mizuho Bank, Ltd., Regions Bank, Bank of Nova Scotia, Sumitomo Mitsui Banking Corp. and Bank of Tokyo-Mitsubishi UFJ, Ltd. are the co-documentation agents.

There is a $65 million sublimit for Canadian dollar borrowings and a $65 million sublimit for swingline loans.

At closing, the company drew $1,142,500,000 of term loans under the agreement.

The company plans to repay $772.6 million of the company's outstanding 1.75% convertible senior notes due 2013 at their maturity on Aug. 1 with borrowings under the facility.

The loans under the credit agreement will mature on July 10, 2018.

The term loan provides for aggregate principal payments equal to 2.5% of the initial term loan amount in each of the first and second years and 5% of the initial term loan amount in each of the third, fourth and fifth years of the term loan, payable in equal quarterly installments beginning Sept. 30.

"We are very pleased to have completed the largest financing transaction for the company to date, which significantly increases our corporate liquidity and provides us with greater financial flexibility to support our growth plans over the coming years," Charles Horn, chief financial officer of Alliance Data, said in the press release.

"Together with our strong free cash flow generation, this ensures our ability to satisfy upcoming debt maturities over the next 12 months while maintaining an ample liquidity position to execute a range of opportunities including reasonably priced acquisitions, share repurchases and further deleveraging. Based on current market conditions, we plan to focus primarily on paying down debt and maintaining liquidity."

Alliance Data Systems is a Dallas-based provider of marketing and loyalty services.

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