Golf Town, Golfsmith plan C$150 million deal; light calendar forecast for holiday week

By Cristal Cody

Prospect News, July 3 - Golf Town Canada Inc. and Golfsmith International Holdings, Inc. woke the Canadian high-yield market early on Tuesday with plans to hold a roadshow for an offering of C$150 million of five-year senior second-lien notes, an informed bond source said.

The roadshow will be held the week of July 9 with pricing expected late that week.

The deal comes as Golf Town plans to acquire U.S. specialty golf retailer Golfsmith International for $6.10 a share, an acquisition that will make it the world's largest specialty golf retailer with 143 stores in Canada and the United States.

Other than the high-yield roadshow announcement, the Canadian markets mostly were quiet on Tuesday after Monday's Canadian holiday and ahead of the early U.S. holiday market close. Light activity in Canada is expected on Wednesday with the U.S. markets closed for Independence Day, sources said.

Bonds ended better in light trading activity.

The Markit CDX Series 18 North American investment-grade index firmed 5 basis points to a spread of 107 bps since Friday's session.

"Market conditions are pretty good today," a syndicate source said. "Everything is kind of stable. We didn't see any corporate issuance today and don't really expect anything. But typically, the end of July and August is slower for issuance in Canada. Over the course of this week and next week would be the period issuers will target if they wanted to get something done."

Canadian government bonds ended flat on the day. Canada's 10-year note yield was unchanged at 1.74%. The 30-year bond yield closed flat at 2.33%.

Golf Town, Golfsmith eyed

Golf Town Canada and Golfsmith International intend to hold a roadshow the week of July 9 for C$150 million in units of senior second-lien notes in the first Canadian dollar high-yield offering since Allied Nevada Gold Corp. sold C$400 million of 8¾% seven-year senior notes (B3/B/) on May 18, an informed bond source said on Tuesday.

Golf Town will issue 70% of each unit and Golfsmith will issue the remaining 30% of each unit.

The roadshow will be held in New York on Monday and in Toronto on July 10 and July 11. Pricing is expected late next week. The notes are being offered on a private placement basis in Canada and under Rule 144A in the United States.

Scotia Capital Inc., TD Securities Inc. and BMO Capital Markets Corp. are the bookrunners. Co-managers are HSBC Capital (Canada) Inc. and National Bank Financial Inc.

The securities are guaranteed by Golf Town Canada Holdings Inc., Golf Town USA Holdings Inc., the issuers, Golf Town USA Inc. and existing restricted subsidiaries and certain future restricted subsidiaries.

The notes are non-callable for two years. In 2014, the notes may be called at par plus ½ the coupon, in 2015 at par plus ¼ the coupon and 2016 and thereafter at par.

The notes have a 101% change-of-control put; an equity clawback for up to 35% in the first two years at par plus the coupon; and a Canadian call at the Canada Bond Yield plus 50 basis points.

Proceeds will be used to repay debt, replace the existing Golfsmith ABL facility and return capital to shareholders.

Markham, Ont.-based Golf Town is owned by Omers Private Equity. Golfsmith is an Austin, Texas-based specialty golf retailer.

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