Staples downsizes term loan to $2.5 billion, hikes pricing by 50 bps

By Paul A. Harris

Portland, Ore., Jan. 28 – Staples Inc. downsized its term loan B to $2.5 billion from $2.75 billion, electing to draw the $250 million difference from its ABL facility, a move that will render a cheaper cost of capital, a market source said.

Pricing is increased to Libor plus 400 basis points from 350 bps.

Discount talk remains unchanged at 99.

The Libor 0.75% Libor floor also remains unchanged.

As reported, Staples revised its plans to fund its term loan B into escrow so that lenders would be offered an increase in pricing. Initial pricing was Libor plus 275 bps with a 0.75% Libor floor and a discount of 99.5.

The escrow proposal is a result of the company extending the termination date for its pending merger with Office Depot Inc. to May 16 from Feb. 4 to allow for the completion of ongoing federal district court litigation with the Federal Trade Commission.

The company intends to fund the loan into escrow on Feb. 2, and the funds can stay in escrow until Sept. 10, with a two-month extension option if the merger has not closed by then, subject to payment of a 25-bps extension fee.

If the merger is terminated, lenders will be paid out at par.

Currently, lenders are being paid the full margin plus the floor on the term loan B because of a ticking fee that was part of the deal at the time of syndication.

Barclays is the administrative agent on the debt.

Staples is a Framingham, Mass.-based retailer of office supplies. Office Depot is a Boca Raton, Fla.-based provider of products, services and solutions for the workplace.

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