By Paul Deckelman
New York, Aug. 12 - Guitar Center Inc. converted bridge loans used to fund its leveraged buyout last fall by Bain Capital Partners LLC into $777 million of junk bonds (Caa1/CCC) on Tuesday, high yield market sources said. The conversion was the latest in a series of such transactions in which bought-out companies have recently converted their LBO bridge loan debt into bonds, for potential sale to investors.
The sources said that Guitar Center's LBO debt was converted into $375 million of 11½% senior cash-pay notes due 2015 and $402 million of 14.09% pay-in-kind notes due 2016.
Both tranches priced at par, and were brought to market by bookrunner J.P. Morgan Chase & Co.
The notes are all non-callable for three years apart from a make-whole call at Treasuries plus 50 basis points. There is a change of control put at 101.
Guitar Center, a Westlake Village, Calif.-based musical instrument and recording equipment retailer, was taken private last year in a $2.1 billion LBO transaction with affiliates of Bain Capital, a Boston-based private equity firm. The deal was announced on June 27, 2007, and was completed by Oct. 9. Guitar Center shareholders received $63 per share in the deal.
| Issuer: | Guitar Center Inc.
|
| Amount: | $477 million
|
| Bookrunner: | J.P. Morgan Chase & Co.
|
| Distribution: | Rule 144A
|
| Trade date: | August 6
|
| Settlement: | August 7
|
| Ratings: | Moody's: Caa1
|
| S&P: CCC
|
|
|
| Cash pay notes
|
| Amount: | $375 million
|
| Security: | Senior notes
|
| Maturity: | Oct. 15, 2015
|
| Coupon: | 11½%
|
| Price: | Par
|
| Yield: | 11½% |
|
| Call: | Non-callable for three years, except for make-whole call at T+50 bps
|
| Equity claw: | For two years, for up to 35% of issue at 111.5 |
|
|
|
| PIK notes
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| Amount: | $402 million
|
| Security: | Pay-in-kind notes
|
| Maturity: | April 15, 2016
|
| Coupon: | 14.09%
|
| Price: | Par
|
| Yield: | 14.09% |
|
| Call: | Non-callable for three years, except for make-whole call at T+50 bps
|
| Equity claw: | For two years, for up to 35% of issue at 114.09
|
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