By Paul A. Harris
Portland, Ore., April 9 – Staples, Inc. downsized its two-part offering of high-yield notes to $3 billion from $3,025,000,000 and priced the bonds on Tuesday, according to market sources.
Allocations went out on $2 billion of seven-year senior secured notes (B1/B+), which priced at par to yield 7½%.
The tranche was downsized from $2,025,000,000 after having been previously upsized from $750 million.
The yield printed at the wide end of the 7¼% to 7½% final yield talk and at the tight end of the 7½% to 7¾% initial guidance.
In addition, Staples priced $1 billion of eight-year senior unsecured notes (B3/B-) at par to yield 10¾%.
The tranche was downsized from $1,375,000,000.
The yield printed in the middle of yield talk in the 10¾% area and well wide of initial guidance in the high 9% to low 10% area.
The initial resizing of the deal, which took place on Monday when price talk on the bonds was announced, saw $375 million shifted to the secured bonds from the unsecured bonds and $900 million shifted to the secured bonds from the concurrent term loan, decreasing the loan size to $2.3 billion from $3.2 billion.
The deal was downsized by a further $25 million on Tuesday. With the further downsizing, the ABL credit facility was increased to $102 million from $77 million.
Extensive covenant changes were announced on Monday, and further covenant changes were announced Tuesday.
An affiliate of sponsor Sycamore Partners took down $180 million of the unsecured bonds, contractually agreeing not to dispose of the notes for value except in limited circumstances, until Sept. 1, 2019.
Trading in the bonds was initially sloppy early Tuesday afternoon but subsequently stabilized, according to market sources.
Goldman Sachs & Co. LLC was the left lead bookrunner. UBS Investment Bank, BofA Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Jefferies LLC, KKR Capital Markets, Morgan Stanley & Co., RBC Capital Markets LLC and Wells Fargo Securities LLC were also leads.
The Framingham, Mass.-based business supplies distributor plans to use the proceeds, together with the term loan and ABL facility proceeds, to refinance debt and make a distribution to sponsor Sycamore Partners.
| Issuer: | Staples, Inc.
|
| Amount: | $3 billion, decreased from $3,025,000,000
|
| Left bookrunner: | Goldman Sachs & Co. LLC
|
| Joint bookrunners: | UBS Investment Bank, BofA Merrill Lynch, Barclays, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Jefferies LLC, KKR Capital Markets, Morgan Stanley & Co. LLC, RBC Capital Markets LLC and Wells Fargo Securities LLC
|
| Trade date: | April 9
|
| Settlement date: | April 16
|
| Distribution: | Rule 144A and Regulation S for life
|
| Marketing: | Roadshow
|
|
|
| Senior secured notes
|
| Amount: | $2 billion, decreased from $2,025,000,000, after being increased from $750 million
|
| Maturity: | April 15, 2026
|
| Coupon: | 7½%
|
| Price: | Par
|
| Yield: | 7½%
|
| Spread: | 508 bps
|
| First call: | Make-whole call at Treasuries plus 50 bps until April 15, 2022, then callable at 103.75
|
| Equity clawback: | 40% at 107.5 until April 15, 2022
|
| Ratings: | Moody's: B1
|
| S&P: B+
|
| Price talk: | 7¼% to 7½%
|
|
|
| Senior unsecured notes
|
| Amount: | $1 billion, decreased from $1,375,000,000
|
| Maturity: | April 15, 2027
|
| Coupon: | 10¾%
|
| Price: | Par
|
| Yield: | 10¾%
|
| Spread: | 830 bps
|
| First call: | Make-whole call at Treasuries plus 50 bps until April 15, 2022, then callable at 105.375
|
| Equity clawback: | 40% at 110.75 until April 15, 2022
|
| Ratings: | Moody's: B3
|
| S&P: B-
|
| Price talk: | 10¾% area
|
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