Dollar General gets commitment for $6.5 billion seven-year term loan

By Susanna Moon

Chicago, Sept. 10 – Dollar General Corp. obtained a commitment letter for a $6.5 billion seven-year senior secured term loan facility, a $2.5 billion senior secured asset-based revolving credit facility and $3.25 billion of senior unsecured increasing-rate loans, or bridge loans, for the acquisition of Family Dollar Stores, Inc., according to an SC TO-T filing with the Securities and Exchange Commission.

Goldman Sachs Bank USA, Goldman Sachs Lending Partners LLC and Citigroup Global Markets Inc. are the joint bookrunners and lead arrangers.

Interest will be Libor plus 300 basis points on the term loan and Libor plus 125 bps to 175 bps on the revolver. The initial interest rate on the bridge loans will be Libor plus 500 bps.

Financing for the acquisition will consist of the $6.5 billion term loan, the $2.5 billion asset-based revolver and either up to $3.25 billion principal amount of senior notes issued in a Rule 144A private placement or up to $3.25 billion of the bridge loans.

The term loan will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the term loan with the balance payable on the seventh anniversary of closing.

Competing offers

As reported on Aug. 18, Dollar General is planning to acquire Family Dollar for $78.50 per share in cash in a deal valued at $9.7 billion.

The company’s pro forma ratio of adjusted debt to last-12-months EBITDAR would be 5.5 times, and the expectation is that it will return to an investment-grade credit profile three years after closing.

Family Dollar has already agreed to be acquired by Dollar Tree Inc. for $74.50 per share, comprising $59.60 in cash and $14.90 in Dollar Tree stock, subject to a collar, as previously reported.

The financing commitment obtained by Dollar General provides funds for the acquisition as well as for estimated fees and expenses, including the $305 million termination fee payable to Dollar Tree in the event Family Dollar terminates the existing merger agreement to enter into a merger agreement with Dollar General.

Dollar Tree expects to be able to close on the Family Dollar acquisition by early 2015 and have leverage of 4.4 times and adjusted debt-to-EBITDAR leverage of 5.6 times at closing.

Dollar General is a Goodlettsville, Tenn.-based discount retailer. Family Dollar is a Matthews, N.C.-based chain of discount stores. Dollar Tree is a Chesapeake, Va.-based discount store operator.

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