J. Crew Group Said to Seek $1.57 Billion Loan to Refinance Debt

Feb 21, 2014 12:58 pm ET

Feb. 21 (Bloomberg) -- J. Crew Group Inc., the retailer owned by TPG Capital and Leonard Green & Partners LP, is seeking a $1.57 billion loan to refinance debt, according to a person with knowledge of the transaction.

The New York-based company proposed paying 3 percentage points more than the London interbank offered rate, said the person, who asked not to be identified without authorization to speak publicly. Libor, the benchmark rate for leveraged loans, will have a 1 percent floor.

J. Crew hired Bank of America Corp. and Goldman Sachs Group Inc. to arrange the financing, which will be covenant-light, or lacking financial maintenance provisions that help protect investors. The retailer has speculative-grade ratings of B2 at Moody’s Investors Service and B at Standard & Poor’s, or five levels below investment grade.

With about $1.57 billion of long-term debt, J. Crew plans to use part of the proceeds from the financing to redeem it 8.125 percent senior unsecured notes due 2019, according to a regulatory filing yesterday.

The retailer, acquired by TPG and Leonard Green in a $3 billion buyout in 2011, estimates revenues increased 9 percent to $2.4 billion in the year ended Feb. 1. Adjusted earnings before interest, taxes, depreciation and amortization rose by as much as 3 percent to $371 million, according to the filing.

J. Crew has a $1.18 billion term loan due 2018 that pays 3 percentage points more than the Libor, with a 1 percent floor on the lending benchmark, according to data compiled by Bloomberg.

The retailer may sell the new loan for 99.5 cents on the dollar, said the person with knowledge of the refinancing. Investors have until 5 p.m. on Feb. 27 to let the banks know whether they will participate in the deal.

The company’s $399.9 million of 8.125 percent notes due in 2019 traded at 104.9 cents yesterday to yield about 7 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

--With assistance from Pham-Duy Nguyen in Seattle. Editors: Faris Khan, Chapin Wright