Bloomberg News

BJ’s Wholesale Said to Reduce LBO Loan to $2.18 Billion

September 21, 2011

(Updates with second-lien debt in fifth paragraph.)

Sept. 21 (Bloomberg) -- BJ’s Wholesale Club Inc., the third-largest U.S. warehouse-club chain, cut the size and increased the rate on $2.18 billion of loans backing it’s buyout by Leonard Green & Partners LLP and CVC Capital Partners, according to a person with knowledge of the matter.

BJ’s cut a first-lien piece by $50 million to $1.075 billion, said the person who declined to be identified because the terms are private. The company boosted the rate on the debt to 5.75 percentage points more than the London interbank offered rate, compared with 5.25 percentage points initially proposed, the person said. The loan will have a 1.25 percent floor on the lending benchmark.

The company, based in Westborough, Massachusetts, is proposing to sell the debt at 96 cents on the dollar, compared with an initial offer of 97.5 cents, the person said.

Lenders must let Deutsche Bank AG, Citigroup Inc., Barclays Plc and Jefferies Group Inc., know by Sept. 23 at 3 p.m. in New York, if they will participate in the deal.

Interest on the $200 million second-lien portion will pay 8.75 percentage points more than Libor, from 8.5 percentage points to 8.75 percentage points initially proposed, the person said. The 1.25 percent floor on the lending benchmark is unchanged.

BJ’s will sell the 7.5-year piece at 95 cents on the dollar, the person said, compared with 97 cents initially offered.

Call Protection

Lenders to the second-lien will now have one year of call- protection, meaning the loan cannot be refinanced in its first year, the person said. Then the debt is callable at 102 cents and 101 cents in the second and third years, respectively, the person said.

First-lien lenders will receive one year of 101 soft-call protection, which is unchanged.

The company now will use 75 percent of all excess cash flow to pay down the financing, compared with an initial stipulation of 50 percent. All proceeds from asset sales and leasebacks will now be used to repay the first-lien piece, compared with an earlier condition of 77.5 percent, the person said.

Cathy Maloney, vice president of investor relations, didn’t immediately return a phone call seeking comment.

The financing, which is covenant-lite, meaning it won’t have financial maintenance requirements, includes $900 million of asset-backed securities, according to data compiled by Bloomberg.

Costco Wholesale Corp. and Wal-Mart Stores Inc.’s Sam’s Club are the two biggest warehouse-club chain positions.

--Editors: Faris Khan, Chapin Wright

To contact the reporter on this story: Krista Giovacco in New York at

To contact the editor responsible for this story: Faris Khan at

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