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Guitar Center tightens talk for $350M secured bond offering

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Guitar Center tightens talk for $350M secured bond offering

Guitar Center Inc. has revised price talk for a five-year (non-call two) secured bond offering to 8.50%, from earlier guidance of 8.75%-9%, sources said. Books for the deal will close at noon ET today.

The transaction earlier today was upsized by $15 million, to $350 million. UBS is lead left bookrunner.

The deal is part of a restructuring financing after the company filed for Chapter 11 bankruptcy protection in November. Proceeds are earmarked to repay all debt outstanding under the company's debtor-in-possession, or DIP, facilities; to refinance the $42 million outstanding under existing super-priority notes; and to pay the cash due to existing secured noteholders as part of a settlement. The $375 million DIP facility includes a $325 million term loan at 7% interest and a $50 million asset-based loan priced at L+550, with a 1.5% Libor floor.

The bankruptcy court overseeing Guitar Center's process has scheduled a hearing on Dec. 17 to confirm the company's proposed prepackaged reorganization plan and for approval of its related disclosure statement.

Guitar Center filed for Chapter 11 on Nov. 21 to implement a restructuring support agreement entered into with "key stakeholders," including equity sponsor Ares Management, new equity investors Brigade Capital Management and The Carlyle Group, and "supermajorities of its noteholder groups" providing for "a comprehensive transaction that will deleverage the company's balance sheet," that would include a new-money equity investment of $165 million and the issuance of $335 million of new first-lien notes.

Guitar Center is a retailer of music products and services in the United States. The company operates two business segments, Guitar Center and Music & Arts.