Toys 'R' Us, SunGard, Neiman Marcus: the big deals yonder

By Paul A. Harris

St. Louis, June 16 - Speculation surrounding what promises to be the summer's - and maybe the year's - three biggest deals intensified this week as sources began zeroing in on the massive financings of the Toys "R" Us, SunGard Data Systems and Neiman Marcus leveraged buyouts.

"Almost anything can happen at this point," a sellside source close to all three deals told Prospect News on Thursday afternoon. "Now that the market is back, it could affect the timing."

However, the source added, shareholders and regulators are holding up hoops for each of the three transactions to jump through, rendering the probability of pre-Labor Day pricings somewhat remote.

For example, the source said, minority shareholders The Iron Workers of Western Pennsylvania Pension and Profit Plan and the Jolly Roger Fund LP. filed suit on Tuesday to block the Toys "R" Us sale, contesting the means by which the tender auction was conducted.

Deutsche Bank Securities and Banc of America Securities LLC will have the books when Global Toys Acquisition LLC eventually brings its junk offering to market. The deal is to help fund the $6.6 billion Toys "R" Us Inc. acquisition by Bain Capital Partners LLC, Kohlberg Kravis Roberts & Co. and Vornado Realty Trust.

The financing also includes a $2.85 billion U.S. asset-based debt facility and a $350 million European working capital facility.

The sellsider went on to say that the first deal out of the gate could well be SunGard Data Systems Inc.'s junk bond backing the $11.3 billion acquisition of the company by Solar Capital Corp., a group formed by Silver Lake Partners, Bain Capital, The Blackstone Group, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts & Co. LP, Providence Equity Partners and Texas Pacific Group.

Deutsche Bank Securities will be involved in the bond transaction. The financing also includes up to a $5 billion credit facility via JP Morgan and Citigroup.

The remaining titan is The Neiman Marcus Group Inc.'s $3.9 billion debt financing, including senior secured notes, also expected to be led by Deutsche Bank Securities.

The retailer is being acquired by the Texas Pacific Group and Warburg Pincus LLC.

The sellside source said that the sizes of the bond portions of all three deals remain in flux.

Still good demand

Meanwhile a buyside source said Thursday that in spite of the May sell-off in the high-yield market, it is probable that all three transactions, massive though they may be, will get done.

"Right now they're just hovering," said the investor. "You have these three megadeals, but away from them there really isn't that much coming.

"And I think there is still a pretty good appetite for reasonable paper. The market has had a pretty good move off of its lows of a month ago. But I think you will have to have a little price backup to properly price these things.

"But there is still good demand."

Timing is everything

Earlier this week another sellside source told Prospect News that the competing investment banks are keeping close eyes upon one another as each attempts to divine the proper moment to launch these three big bond deals.

"People know they are coming at some point," the official said. "The question is, do they all come at the same time and flood the market, or will they be spaced out? Is everyone going to come after the Fourth of July but before the August break, because that's where the traditional window is?

"You would think that some of it would be happening now. But we haven't seen it yet."

"And buyers are out there," the source asserted. "We're not hearing that these deals are seeing crazy oversubscription. But the average deal that is in the market now seems to be going well."

Sara Rosenberg contributed to this story.

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