Hudson's Bay firms term B at Libor plus 375 bps, sets second-lien talk

By Sara Rosenberg

New York, Oct. 4 - Hudson's Bay Co. finalized the spread on its $2 billion seven-year first-lien senior secured term loan B at Libor plus 375 basis points, the tight end of revised talk of Libor plus 375 bps to 400 bps but up from initial talk of Libor plus 325 bps to 350 bps, according to a market source.

The first-lien term loan B still has a 1% Libor floor, an original issue discount of 99 and 101 soft call protection for one year.

At the time of the first pricing update, the first-lien term loan was upsized from $1.9 billion and soft call protection was extended from six months.

In addition, price talk on the company's recently added $300 million eight-year second-lien term loan emerged at Libor plus 750 bps to 775 bps with a 1% Libor floor and an original issue discount of 99, the source said.

The second-lien term loan has call protection of 103 in year one, 102 in year two and 101 in year three.

The company's roughly $4 billion credit facility also includes a C$750 million ABL revolver and a $950 million ABL revolver.

Bank of America Merrill Lynch and RBC Capital Markets are the lead banks on the deal.

Proceeds will be used to help fund the acquisition of Saks Inc. for $16.00 per share in an all-cash transaction valued at about $2.9 billion, including debt, and to refinance some existing debt.

Other funds for the transaction will come from $1 billion of equity, including $500 million from Ontario Teachers' Pension Plan and $250 million from West Face Capital Inc., and cash on hand.

Plans for a $400 million senior notes offering were terminated when the first-lien term loan B was upsized and the second-lien term loan was added to the capital structure.

About $357 million will be drawn under the new revolvers for the acquisition.

Closing is expected by year-end, subject to approval by Saks shareholders, regulatory approvals and other customary conditions.

The combined company would have generated in fiscal 2012 pro forma sales of about C$7.2 billion and normalized EBITDA of around C$587 million, before any synergies.

Leverage will be around 5.7 times, but the company plans on bringing that down to 2.5 times within four to five years.

Hudson's Bay is an Ontario-based operator of department stores. Saks is a New York-based retailer of clothes and accessories for men, women, children and the home.

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