HD Supply launches $550 million term loan B at Libor plus 275 bps

By Sara Rosenberg

New York, Sept. 12 – HD Supply Inc. launched on its call on Monday a $550 million seven-year incremental covenant-light term loan B with price talk of Libor plus 275 basis points with no Libor floor and an original issue discount of 99.5, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The incremental term loan has 101 soft call protection for six months.

Bank of America Merrill Lynch, Barclays, Goldman Sachs Bank USA, J.P. Morgan Securities LLC and Wells Fargo Securities LLC are the lead banks on the deal.

Commitments are due on Thursday, and the deal is expected to price and allocate on Friday.

Proceeds from the term loan B will be used to help redeem the company’s $1,275,000,000 of 7˝% senior notes due 2020.

Other funds for the transaction will come from a $600 million ABL revolver draw and $228 million in cash on hand.

With the transaction, the company is seeking to amend its existing covenant-light term loan due August 2021 to eliminate the 1% Libor floor through a replacement tranche that will replace all of the outstanding term loans in an aggregate principal amount of $843,625,000.

The amendment would also waive the 3.25x restricted payments ratio since this transaction will result in 3.4x net secured leverage, and reset the excess cash flow sweep to apply to fiscal year 2017.

The spread on the existing term loan will remain at Libor plus 275 bps.

Lenders are offered a 10 bps consent fee.

Closing is targeted for the week of Oct. 17.

HD Supply is an Atlanta-based industrial distributor.

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