BofA Shops QVC TL, JPM Readies Smithfield Facility
June 25, 2009
Loan investors have two new deals to sink their teeth into. This week, Bank of America began shopping a $500 million term loan B due 2015 for QVC, while JPMorgan arranged a $200 million term loan for Smithfield Foods.
Price talk on QVC’s term loan was at Libor plus 350 bps, with an OID between 98 and 98.5. The term loan also features a 2% Libor floor. QVC, a West Chester, Pa.-based television home shopping company, plans to use the proceeds from the term loan for general corporate purposes and to repay existing debt.
Commitments for the term loan B were due by Friday. However, it couldn’t be determined if the commitment date was extended, an occurrence that isn’t rare these days. Calls to QVC were not returned, and a BofA spokeswoman declined to comment.
QVC is rated BB+ by Standard & Poor’s. However, its term loan is rated BBB, two notches above junk. The rating reflects QVC’s participation in a highly competitive retail industry and current pressure on consumer spending. Moreover, the rating reflects the company’s high debt leverage and historically aggressive financial policy. Despite the negative rationale, S&P said QVC will “likely” de-lever over the intermediate term, and over the long term, its financial policy will likely be fluid, especially if the capital markets return to normal. QVC’s positives are its strong record of performance, its ability to expand into new markets, its scale and cost advantages and its good discretionary cash flow. S&P also assigned a recovery rating to the term loan that anticipates a 90% to 100% retrieval of principal in the event of a default.
Meanwhile, JPMorgan arranged a $200 million term loan for Smithfield Foods, a Smithfield, Va.-based pork producer. The proceeds from the term loan will be used to repay an existing $200 million term loan that matures in August 2011.
It couldn’t be determined when JPMorgan plans to market the term loan and if the bank will just seek out existing lenders or if it will seek out a new crop of investors. Calls to Smithfield and JPMorgan were not returned.
Smithfield’s term loan comes on top of a $500 million senior secured notes issue due 2014 and a $1 billion asset-backed revolver. JPMorgan held a conference call today for the new notes. And as of LFN’s deadline, the bonds were priced between 11% and 11.25%, with an OID between three to four points.
The proceeds from the new notes will be used to repay Smithfield’s existing debt and for general corporate purposes. Smithfield is rated B by S&P.
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