Burger King flat as Tim Hortons purchase agreement reached; Scientific Games plans meeting

By Sara Rosenberg

New York, Aug. 26 – Burger King Worldwide Inc.’s term loan continued to hold steady in the secondary market on Tuesday following the announcement that a definitive agreement has been reached to acquire Tim Hortons Inc.

In more happenings, Scientific Games Corp. surfaced with plans to hold a lender meeting next week.

Burger King firm

Burger King’s term loan was unchanged in trading on Tuesday at par bid, par ½ offered after news came out that the company entered into an agreement to buy Tim Hortons and that funding for the transaction will come from a $7.25 billion senior secured credit facility, $2.25 billion of senior secured second-lien notes and $3 billion of preferred equity from Berkshire Hathaway, according to a trader.

The credit facility consists of a $500 million revolver and a $6.75 billion term loan B.

Pricing on the term loan B is expected around Libor plus 300 basis points; the notes are expected to be priced around that area or a little higher; and the preferred equity will have a 9% coupon, company officials said in a conference call.

J.P. Morgan Securities LLC and Wells Fargo Securities LLC are leading the debt that is expected to be out in the market in the next few weeks.

Closing is expected late this year or early next year, subject to approval of Tim Hortons shareholders and receipt of certain antitrust and regulatory approvals in Canada and the United States.

Burger King leverage

The newly merged Canadian-based Burger King/Tim Hortons company will have about 5 times leverage through the bank and bond debt at close.

Under the agreement, Tim Hortons shareholders will receive C$65.50 in cash and 0.8025 of a common share of the new company per Tim Hortons share, or each Tim Hortons shareholder will have the ability to elect to instead receive, for each Tim Hortons share held, either C$88.50 in cash or 3.0879 common shares of the new company, in each case subject to pro ration.

Each outstanding common share of Burger King will be converted into 0.99 of a share of the parent company and 0.01 of a unit of a newly formed Ontario limited partnership controlled by the new parent company; however, holders of shares of Burger King common stock will be given the right to elect to receive only partnership units in lieu of common shares of the new parent company.

Burger King’s current owner, 3G Capital, will own about 51% of the new company.

Burger King is a Miami-based fast food hamburger chain. Tim Hortons is an Oakville, Ont.-based restaurant chain.

Scientific Games on deck

In other news, Scientific Games set a loan lender meeting for Sept. 3, according to a market source, who said official details are not yet available.

In early August, the company said that it would be getting $2,085,000,000 of incremental senior secured bank debt, consisting of a $1,735,000,000 seven-year incremental term loan and a $350 million five-year incremental revolver, and would be amending its existing $2,294,000,000 senior secured term loan and existing $300 million senior secured revolver to allow for the new debt.

Based on filings with the Securities and Exchange Commission, the term loan is expected at Libor plus 375 bps with a 1% Libor floor and 101 soft call protection for six months, and the revolver is expected at Libor plus 300 bps.

Bank of America Merrill Lynch, J.P. Morgan Securities LLC and Deutsche Bank Securities Inc. are the lead banks on the debt.

Scientific Games buying Bally

Proceeds from Scientific Games’ incremental bank debt will be used to help fund the acquisition of Bally Technologies Inc. for $83.30 per share in cash, for a total transaction value of about $5.1 billion, including net debt of around $1.8 billion.

Other funds for the transaction are anticipated to come from $750 million in senior secured notes, $2.2 billion in eight-year senior unsecured notes and $500 million in 10-year senior unsecured notes.

The notes are backed by a $3.45 billion one-year bridge loan commitment, split between a $750 million senior secured tranche priced at Libor plus 475 bps with a 1% Libor floor, a $2.2 billion unsecured eight-year tranche priced at Libor plus 625 bps with a 1% Libor floor, and a $500 million unsecured 10-year tranche priced at Libor plus 675 bps with a 1% Libor floor. The spread on all tranches will increase by 50 bps every three months until it hits a specified cap.

Closing is expected in early 2015, subject to receipt of Bally shareholder approval, antitrust and gaming regulatory approvals and other customary conditions.

Scientific Games is a New York-based developer of technology-based products and services and associated content for gaming and lottery markets. Bally Technologies is a Las Vegas-based provider of games, table game products, systems, mobile, and iGaming solutions to gaming operators.

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