Hudson's Bay flexes second-lien term loan to Libor plus 725 bps

By Sara Rosenberg

New York, Oct. 8 - Hudson's Bay Co. trimmed pricing on its $300 million eight-year second-lien term loan (B-) to Libor plus 725 basis points from talk of Libor plus 750 bps to 775 bps, according to a market source.

The second-lien loan that was added to the capital structure last week still has a 1% Libor floor, an original issue discount of 99 and 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, a $950 million ABL revolver and a $2 billion seven-year first-lien senior secured term loan B (B1/BB).

Pricing on the first-lien term loan B, which allocated on Monday, is Libor plus 375 bps with a 1% Libor floor and it was sold at an original issue discount of 99.

The first-lien term loan has 101 soft call protection for one year.

During syndication, the first-lien B loan was upsized from $1.9 billion, pricing firmed at 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, and the call protection was extended from six months.

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 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.

When the first-lien term loan B was upsized and the second-lien loan tranche was added, the company eliminated plans for a $400 million senior notes offering.

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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