Smart & Final Grocery revises term loan B amount to $340 million

By Sara Rosenberg

New York, June 17 – Smart & Final Grocery (Saffron Borrowco LLC) increased its six-year covenant-lite term loan B (B3/B) to $340 million from a revised amount of $320 million, but the tranche size is still lower than the initially proposed amount of $380 million, according to a market source.

Pricing on the term loan is Libor plus 675 basis points with a 0% Libor floor and an original issue discount of 90.

The term loan has 101 hard call protection for two years.

Recommitments were scheduled to be due at 1 p.m. ET on Monday, the source said.

Earlier in syndication, pricing on the term loan was raised from Libor plus 650 bps, the discount widened from talk in the range of 97 to 98, the call protection was changed from a 101 soft call for one year, the maturity was shortened from seven years, amortization was increased to 1% in year one, 2.5% in years two and three and 5% thereafter from 1% per annum, MFN was revised to 50 bps with no sunset from 50 bps with an 18-month sunset and MFN carve-outs were removed.

Also, previously, the incremental starter basket was reduced to the greater of $80 million and 62.5% of last-12-months EBITDA from greater of $97.5 million and 75% of LTM EBITDA and all lien incurrence ratios were tightened by 0.25x, debt was revised to reduce the general basket to the greater of $50 million and 40% of LTM EBITDA from the greater of $87 million and 67% of LTM EBITDA, the borrowing base grower was eliminated from the ABL facility and other debt baskets were tightened.

Other earlier changes included changing the general restricted payment basket to the greater of $13 million and 10% of LTM EBITDA from the greater of $26 million and 20% of LTM EBITDA, reducing the cumulative credit starter basket to the greater of $13 million and 10% of LTM EBITDA from the greater of $26 million and 20% of LTM EBITDA, and making the use of the cumulative credit for restricted payments where the restricted payment will be a dividend to the sponsor subject to pro forma closing net total leverage.

In addition, previously, investments were changed to tighten investments baskets and adjust unlimited investments to be subject to pro forma net leverage of 1x inside closing date leverage from 0.75x inside closing date leverage, the EBITDA definition was modified to put a 25% cap on cost savings unrelated to the transaction with an 18-month look-forward, from uncapped cost savings and synergies and no realization period, and the company became required to hold quarterly lender calls and management discussion and analysis.

The company’s now $490 million of senior secured credit facilities also include a $150 million ABL revolver.

Deutsche Bank Securities Inc., BMO Capital Markets Corp., RBC Capital Markets, Bank of America Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC and UBS Investment Bank are the bookrunners on the debt.

Proceeds will be used to help fund the buyout of Smart & Final Stores Inc. by Apollo Global Management LLC.

Closing is expected by the third quarter, subject to more than 50% of the company’s shares being tendered, regulatory approvals and other customary conditions.

Smart & Final Grocery is a Commerce, Calif.-based food retailer operating smaller-box, warehouse-style club stores.

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