February 16, 2018 / 8:53 PM / a month ago

American Greetings LBO backed by $370 million term loan

NEW YORK (LPC) - US greeting card and stationer American Greetings’ leveraged buyout by private firm Clayton, Dubilier & Rice (CD&R) will be backed by a roughly $370 million institutional term loan, according to three sources familiar with the matter.

CD&R on Tuesday announced it will acquire a 60 percent stake in the 112-year-old company from the Weiss family, descendants of the founder, which will retain a 40 percent stake. Terms of the transaction were not disclosed.

The company’s brands include American Greetings, Papyrus, Recycled Paper Greetings, Gibson, and Carlton Cards.

“Most people assume this is a business in steady decline, but I don’t think that’s true, though it’s not a high growth trajectory business either,” one of the sources said. “CD&R thinks they can do a ton from a cost perspective.”

The term loan will be secured and have a first priority lien, the sources said.

Barclays, Deutsche Bank, Citizens Bank, ING Capital, Bank of America Merrill Lynch, HSBC, Sumitomo Mitsui Financial Group and KeyBanc Capital Markets are providing committed financing, according to a press release.

Syndication is expected to launch within the next two months.

The financing comes with a roughly $250 million revolving credit facility, one of the sources said.

The company’s existing capital structure includes a $285 million term loan A due in 2022, which will be refinanced with the new loan, and a $400 million high-yield bond that matures in 2025.

CD&R is expected to leave the bond in place given it is in its non-call period, which would require the company to pay an expensive “make-whole” premium to bondholders if it were refinanced.

The bond is currently trading above its 101 put option, a provision in high-yield bonds that allows bondholders to sell their paper back to the company at a 1 percent premium over face value upon a change of control. The current trading levels provide less incentive for bondholders to exercise the put.

The company plans to solicit bondholders’ consents to waive the provision.

CD&R is contributing about $200 million in preferred equity, the sources said, implying around $330 million of total equity capitalization including the amount of the Weiss family’s roll over and an enterprise value of approximately $1.1 billion.

The Weiss family took the company private in 2013 in a

$878 million deal.

Barclays, BAML, Deutsche Bank, ING and CD&R declined to comment. HSBC, Citizens, Sumitomo and KeyBanc did not respond to requests for comment.

Reporting by Andrew Berlin; Editing by Michelle Sierra

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