Heinz $9.5 billion bank debt blowout to allocate on Wednesday

By Paul A. Harris

Portland, Ore., March 25 - H.J. Heinz Co. $9.5 billion of term loans are set to allocate on Wednesday, according to a trader who said that the deal is a blowout, and is playing to $17 billion of orders.

As reported, Heinz reduced pricing on its six-year term loan B-1 to Libor plus 225 basis points from talk of Libor plus 275 bps to 300 bps and on its seven-year term loan B-2 to Libor plus 250 bps from talk of Libor plus 275 bps to 300 bps, according to a market source.

Also, both term loans saw the addition of a 25 bps step-down when net first-lien leverage is less than 2.1 times, the source said. At close, net first-lien leverage will be 3.1 times.

The term loan B-1 still has a 1% Libor floor, an original issue discount of 99½ and 101 soft call protection for one year.

Meanwhile, the term loan B-2 saw its original issue discount talk move to 99½ to 99¾ from just 991/2, the source continued.

The B-2 loan continues to have a 1% Libor floor and 101 soft call protection for two years.

Furthermore, the total amount of term loan B-1 and B-2 was reduced to $9.5 billion from $10.5 billion as the company upsized its senior secured second-lien notes offering to $3.1 billion from $2.1 billion.

Sizes on the term loan tranches are still to be determined.

In addition to the term loans, the company's now $11.5 billion senior secured credit facility (Ba2/BB/BB+), down from $12 billion, includes a $2 billion revolver that was upsized from $1.5 billion.

At launch, the company was planning on getting $8.5 billion of U.S. term loan B-1 and B-2 debt, $1.4 billion euro equivalent in six-year term loan B-1 and seven-year term loan B-2 debt, and up to $600 million in sterling-denominated six-year term loan B-1 and seven-year term loan B-2.

However, it was recently announced that the company would not be pursuing the euro and sterling loans and instead would move those funds into the U.S. loans to get a 100% dollar capital structure.

The euro and sterling B-1 and B-2 loans were talked at Libor plus 300 bps to 325 bps with a 1% Libor floor and an original issue discount of 991/2. There was 101 soft call protection for one year on the B-1 tranche and soft call protection of 101 for two years on the B-2 tranche.

J.P. Morgan Securities LLC, Well Fargo Securities LLC, Barclays and Citigroup Global Markets Inc. are the arrangers on the deal.

Proceeds will be used to help fund the company's buyout by Berkshire Hathaway and 3G Capital for $72.50 in cash per share. The deal, which includes the assumption of Heinz's outstanding debt, is valued at about $28 billion.

Other funds for the transaction will come from $16.24 billion of equity.

Closing is expected in the third quarter, subject to shareholder approval and regulatory approvals.

Heinz is a Pittsburgh-based food product company.

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