Hanesbrands outlines $2.6 billion credit facility, $500 million bonds for spin-off

By Sara Rosenberg

New York, July 25 - Hanesbrands Inc. detailed financing plans for its spin-off from Sara Lee Corp., including that a new $2.6 billion senior secured credit facility will be involved as well as $500 million of senior notes, according to 10-12B/A filed with the Securities and Exchange Commission Tuesday.

Merrill Lynch Capital Corp. and Morgan Stanley Senior Funding Inc. are joint lead arrangers on the credit facility.

The credit facility consists of a $500 million five-year revolver, a $350 million six-year term loan A, a $1.3 billion seven-year term loan B and a $450 million 71/2-year second-lien term loan.

Amortization on the term loan A will be 5% in year one, 10% in year two, 15% in year three, 20% in year four and 25% in years five and six.

Amortization on the term loan B will be 1% per annum, with the balance due on the maturity date.

Financial covenants under the first-lien bank debt will include a maximum total leverage ratio and a minimum interest coverage ratio.

Covenants under the second-lien bank debt will be substantially the same as the first-lien debt, subject to larger exceptions in certain covenants and less restrictive levels for financial covenants.

A substantial portion of the proceeds from the term loan and the bond offering will be used to pay a dividend to Sara Lee prior to the spin-off.

The revolver is expected to be undrawn at close.

As a backup for the bond offering, Hanesbrands has obtained a commitment from Merrill and Morgan Stanley for a $500 million one-year bridge loan facility.

In the spin-off, Sara Lee will distribute to its stockholders all of the outstanding Hanesbrands shares.

The businesses to be spun off into Hanesbrands include Hanes, Champion, Playtex, Bali, Just My Size, barely there and Wonderbra.

Following the spin-off, Winston-Salem, N.C.-based Hanesbrands will operate as a stand-alone, publicly traded, global apparel company.

The transaction is subject to market, regulatory and other conditions.

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