Key Safety gains on acquisition; Toys “R” Us trades higher; Mattress Firm revised again

By Sara Rosenberg

New York, Feb. 2 – Key Safety Systems’ term loan headed higher in trading on Tuesday with news that the company is being acquired by Ningbo Joyson Electronic Corp., and Toys “R” Us Inc.’s term loan B-4 strengthened with capital structure refinancing plans.

Moving to the primary market, Mattress Firm Holding Corp. downsized its incremental term loan and increased pricing for a second time, and Lago Resort & Casino LLC surfaced with new deal plans.

Key Safety rises

Key Safety Systems’ term loan gained ground in the secondary market on Tuesday after it was announced that Ningbo Joyson Electronic is buying Key Safety from FountainVest Partners, the Canada Pension Plan Investment Board, Crestview Partners and members of management in a cash transaction valued at about $920 million, according to traders.

Following the news, Key Safety’s term loan was quoted by one trader at 99½ bid, par offered, up from 96½ bid, 97½ offered, and by a second trader at 98¾ bid, 99½ offered.

Closing on the acquisition is expected in the first half of this year, subject to regulatory filings, approvals and other customary conditions.

Key Safety is a Sterling Heights, Mich.-based supplier of advanced engineered safety products for automotive and non-automotive markets. Ningbo Joyson is a Ningbo, China-based automotive supplier.

Toys “R” Us better

Also in trading, Toys “R” Us’ term loan B-4 jumped to 80 bid, 83 offered from 77 bid, 79 offered following the company’s disclosure in a news release that it has commenced a process to refinance its capital structure, a trader remarked.

The company said that it is working with Bank of America Merrill Lynch, Goldman Sachs and Lazard to assist in the refinancing process.

In the news release, the company also disclosed that adjusted EBITDA for the fiscal year ended Jan. 30 is expected to be about $780 million, an improvement of 21% from the prior year’s reported adjusted EBITDA of $642 million.

The refinancing process is underway “in light of the positive business momentum reflected in the estimated financial results for the fiscal year”, the release added.

Toys “R” Us is a Wayne, N.J.-based toy and baby products retailer.

Mattress Firm reworked

Over in the primary market, Mattress Firm cut its senior secured incremental first-lien term loan (Ba3/B+) due Oct. 20, 2021 to $665 million from $730 million and raised the spread to Libor plus 525 basis points from adjusted talk of Libor plus 500 bps and initial talk of Libor plus 450 bps to 475 bps, according to a market source.

As before, the term loan has a 1% Libor floor, an original issue discount of 97 and 101 soft call protection for one year.

However, earlier in syndication, the discount was changed from initial talk of 98.5 to 99, the call protection was extended from six months, and a total net leverage covenant was added to the originally covenant-light term loan.

Commitments were due at 5 p.m. ET on Tuesday, the source said.

In addition to the incremental term loan, the company is seeking a $200 million amended and extended ABL revolver.

Mattress buying Sleepy’s

Proceeds from Mattress Firm’s new debt and cash on hand will be used to fund the purchase of HMK Mattress Holdings LLC, the holding company of Sleepy’s and related entities, for $780 million, subject to working capital and other customary adjustments.

Barclays is the lead left bookrunner on the deal.

With the incremental term loan, the company is revising its existing $693 million term loan due Oct. 20, 2021 to mirror all terms of the new loan. As a result of all the changes made to the incremental term loan during syndication, the existing term loan will have pricing set at Libor plus 525 bps with a 1% Libor floor, 101 soft call protection for one year and a total net leverage covenant.

Net secured and net total leverage is 3.9 times, down from 4 times under the original structure, the source added.

Mattress Firm is a Houston-based mattress retailer. Sleepy’s is a Hicksville, N.Y.-based mattress retailer.

Lago Resort on deck

Lago Resort & Casino set a bank meeting for 10 a.m. ET in New York on Wednesday to launch $325 million in term loans, split between a $240 million six-year first-lien term loan and an $85 million 6.5-year second-lien term loan, according to a market source.

The first-lien term loan is talked at Libor plus 900 bps to 950 bps with a 1% Libor floor and an original issue discount of 98, and is non-callable for two years, then at 102 in year three and 101 in year four, the source said.

And, the second-lien term loan is talked at a fixed-rate of 14% with a discount of 97.25, and is non-callable for two years, then at 104 in year three and 102 in year four, the source continued.

Credit Suisse Securities (USA) LLC is leading the deal that will be used to fund the development of the Lago Resort & Casino, which is located in Tyre, Seneca County, between Rochester and Syracuse, New York.

Commitments are due on Feb. 12, the source added.

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