Weight Watchers details $2.4 billion term loans, $250 million revolver

By Marisa Wong

Madison, Wis., April 3 - Weight Watchers International, Inc. entered into a credit agreement for a $250 million revolving credit facility due April 2, 2018, a $300 million tranche B-1 term loan credit facility due April 2, 2016 and a $2.1 billion tranche B-2 term loan credit facility due April 2, 2020, according to an 8-K filing with the Securities and Exchange Commission.

Price talk for the $2.4 billion of term loans was announced late last week. The company entered into the new credit agreement on Tuesday.

JPMorgan Chase Bank, NA is the administrative agent and an issuing bank, and Bank of Nova Scotia is the revolving agent, a swingline lender and an issuing bank.

The filing said that Weight Watchers may request incremental term loans or increases in commitments under the revolver, in each case in an amount not exceeding the greater of $400 million plus the amount of voluntary prepayments of term loans and voluntary reductions of revolving commitments plus any other amount that may be incurred, as long as the senior secured leverage ratio is no more than 3.75 to 1.00 on a pro forma basis.

Interest for the tranche B-1 term loan is initially Libor plus 275 basis points, and interest for the tranche B-2 term loan is Libor plus 300 bps, subject to a 0.75% Libor floor.

The coupon on both tranches steps up by 25 bps should the company's credit ratings fall to Ba3 from Moody's Investors Service and BB- from Standard & Poor's. Currently the respective ratings are Ba1 and BB-.

Pricing for the revolver is based on the company's total leverage ratio. At the borrower's current total leverage ratio, interest is Libor plus 225 bps.

The commitment fee, also based on the total leverage ratio, is initially 40 bps.

The credit agreement requires scheduled quarterly payments on the term loans in amounts equal to 1% per year, with the balance paid at maturity.

In addition, the agreement contains some restrictive covenants applicable to all the facilities as well as a financial covenant under the revolving facility.

Under the revolver, the company must maintain a maximum total leverage ratio of 5.00 to 1.00 as of the end of each fiscal quarter, but only if on the last day of that quarter outstanding amounts under the revolver exceed 20% of the aggregate amount of commitments. The maximum total leverage ratio will step down to 4.75 to 1.00 at the end of the first quarter of fiscal 2015 and step down to 4.50 to 1.00 at the end of the second quarter of fiscal 2015.

As noted before, proceeds will be used to repay the company's existing term loan B due 2014, term loan C due 2015, term loan D due 2016, term loan E due 2017 and term loan F due 2019.

Weight Watchers is a New York-based provider of weight management services.

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