Bloomberg News

Blackstone’s Pinnacle Foods Decreases Rate on $400 Million Loan

March 27, 2012

Blackstone Group LP’s Pinnacle Foods Finance LLC, cut the interest rate it will pay on a $400 million term loan E the company is seeking to refinance debt, according to a person with knowledge of the transaction.

The debt, due in 6.5 years, will now pay interest at 3.5 percentage points more than the London interbank offered rate, down from 3.75 percentage points, said the person, who declined to be identified because the terms are private. The minimum on the benchmark will remain unchanged at 1.25 percent.

The interest rate will step down upon Pinnacle’s initial public offering and when leverage, or debt to earnings before interest, taxes, depreciation and amortization, is at 5 times, the person said. Pinnacle Foods, the maker of Duncan Hines cake mixes and Hungry Man frozen dinners, hired Bank of America Corp. and Barclays Plc to manage its IPO, two people with knowledge of the situation said in February.

Pinnacle is proposing to sell the loan at 99 cents on the dollar, the person said, reducing proceeds for the company and boosting the yield to investors.

Lenders are being offered one-year soft-call protection of 101 cents, meaning the company would have to pay 1 cent more than face value to refinance the debt during the first year, the person said.

Proceeds from the new loan will be used to refinance the company’s existing term loan D which pays interest at 4.25 percentage points more than Libor with a 1.75 percent floor, and its 10.625 percent senior subordinated notes due in 2017, the person said.

Commitment Deadline

The company is also seeking to extend at least 65 percent of a term loan to October 2016 from April 2014, the person said. The extended term loan will pay interest at 3.5 percentage points more than Libor, the person said.

Lenders are being offered a 15 basis-point fee to agree to the extension and a 10 basis-point consent fee, the person said. A basis point is 0.01 percentage point.

Barclays is arranging the financing for the Parsippany, New Jersey-based company and investors have until today at 5 p.m. in New York to submit commitments.

Blackstone purchased Pinnacle Foods for $2.2 billion in 2007 and added Birds Eye Foods Inc. in 2009 for $1.3 billion, according to data compiled by Bloomberg.

Peter Rose, a spokesman for Blackstone, declined to comment.

In a revolving credit facility, money can be borrowed again once it’s repaid; in a term loan it can’t.

To contact the reporter on this story: Michael Amato in New York at Mamato3@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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