Ascena Retail plans $2.4 billion credit facility for purchase of ANN; note issuance possible

By Sara Rosenberg

New York, May 18 – Ascena Retail Group Inc. has received a commitment for a $2.4 billion credit facility to help fund its acquisition of ANN Inc. and refinance some existing debt, according to an 8-K filed with the Securities and Exchange Commission on Monday.

The facility consists of a $600 million five-year asset-based revolver and a $1.8 billion seven-year senior secured term loan B.

However, in the commitment letter, the company stated that it may elect to issue senior unsecured notes or senior secured notes, which will reduce the term loan B amount on a dollar-for-dollar basis.

Goldman Sachs Bank USA is the sole lead arranger and bookrunner on the revolver, and Goldman Sachs and Guggenheim Securities LLC are the joint lead arrangers and bookrunners on the term loan B.

Pricing on the revolver is expected at Libor plus 150 basis points, with a step-up to Libor plus 175 bps and a step-down to Libor plus 125 bps based on average daily excess availability.

The revolver commitment fee is expected at 37.5 bps with a step-down to 25 bps based on average daily utilization.

Pricing on the term loan is anticipated to be Libor plus 350 bps if corporate ratings are Ba3/BB- and Libor plus 375 bps if corporate ratings are lower than Ba3/BB-, with a 1% Libor floor.

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

Under the agreement, ANN is being purchased for $37.34 in cash and 0.68 of a share of Ascena common stock in exchange for each share of ANN common stock. The transaction gives ANN an enterprise value of about $2 billion.

Closing is expected in the second half of this year, subject to customary conditions, including the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and ANN shareholder approval.

At closing, ANN stockholders will own approximately 16% of Ascena.

Pro forma debt to last-12-months adjusted EBITDA excluding synergies will be 2.6 times.

Ascena is a Mahwah, N.J.-based specialty retailer offering clothing, shoes and accessories for missy and plus-size women. ANN is a New York-based women’s specialty retail fashion company.

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