Hilton Grand plans $1.3 billion term loan, $675 million notes

By Sara Rosenberg

New York, March 11 – Hilton Grand Vacations Inc. has received a commitment for a $1.3 billion seven-year senior secured term loan B and plans to issue $675 million of senior unsecured notes to help support its acquisition of Diamond Resorts International Inc., according to an 8-K filed with the Securities and Exchange Commission on Thursday.

Based on the commitment letter, pricing on the term loan is expected at Libor plus 250 basis points with a 0.5% Libor floor.

The term loan has 101 soft call protection for six months and amortization of 1% per annum.

Backing the notes is a commitment for a $675 million one-year senior unsecured bridge loan priced at Libor plus 450 bps, stepping up by 50 bps every three months until a specified cap is reached. The debt has a 0% Libor floor.

BofA Securities Inc., Deutsche Bank Securities Inc. and Barclays are the arrangers on the debt, with BofA the administrative agent on the term loan B and Deutsche the administrative agent on the bridge loan.

Proceeds will be used to refinance existing debt in connection with the acquisition, including senior notes at Hilton Grand Vacations and notes at Diamond Resorts.

The company has also obtained “back-stop” commitments to amend its existing revolving credit facility or otherwise enter into a new $800 million revolver in connection with the acquisition.

Under the agreement, Diamond Resorts is being purchased from Apollo Global Management Inc. and Reverence Capital Partners for 34.5 million shares of Hilton Grand Vacations common stock. The transaction is valued at $1.4 billion.

Upon closing, existing Hilton Grand Vacations shareholders will own about 72% of the combined company and the Apollo Funds will own around 28% of the combined company.

Pro forma leverage will be 6.5x but is expected to return to below 3x within 24 months through significant cash flow generation.

Closing is targeted for the summer, subject to customary conditions, regulatory approvals and shareholder approval.

Hilton Grand Vacations is an Orlando, Fla.-based timeshare company. Diamond Resorts is a timeshare operator.

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