99 Cents Only Stores sets Thursday launch for $675 million facility

By Sara Rosenberg

New York, Nov. 28 - 99 Cents Only Stores has scheduled a bank meeting for 10:30 a.m. ET on Thursday to launch its proposed $675 million credit facility, according to a market source.

RBC Capital Markets, BMO Capital Markets and Deutsche Bank Securities Inc. are the joint lead arrangers and bookrunners on the deal.

The credit facility consists of a $150 million five-year ABL revolver and a $525 million seven-year term loan.

Based on filings with the Securities and Exchange Commission, pricing on the ABL revolver is expected at Libor plus 200 basis points with a 37.5 bps unused fee, and pricing on the term loan is expected at Libor plus 600 bps with a 1.5% Libor floor.

The coupon on the ABL revolver is expected to range from Libor plus 175 bps to 225 bps, and the unused fee from 37.5 bps to 50 bps, based on average excess availability.

Official price talk is not yet available.

Also, the term loan is anticipated to include 101 soft call protection for one year and a maximum total leverage ratio covenant and will amortize at a rate of 1% per annum.

The ABL revolver has a $50 million accordion feature, and the term loan has a $150 million accordion feature.

Proceeds will be used to help fund the buyout of the company by Ares Management LLC and Canada Pension Plan Investment Board for $22.00 per share in cash in a transaction with a total equity value of about $1.6 billion.

Other funds for the transaction will come from about $635.9 million of equity, and there is also a commitment for a $250 million bridge loan.

Pricing on the one-year bridge loan is expected at Libor plus 950 bps with a 1.5% Libor floor. After three months, the spread will increase by 50 bps each full fiscal quarter thereafter.

Closing is anticipated in the first quarter of 2012, subject to shareholder approval and the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act.

99 Cents Only Stores is a City of Commerce, Calif.-based operator of extreme value retail stores.

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