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PIK-toggle tailwind: Jo-Ann Stores drives by with high yield bond dividend deal

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PIK-toggle tailwind: Jo-Ann Stores drives by with high yield bond dividend deal

Riding the coattails of two PIK-toggle dividend deals in as many weeks, Jo-Ann Stores today intends to place a $325 million issue via J.P. Morgan, Bank of America, and Barclays after merely and investor call. It’s planned to be an offering of seven-year (non-call 1.5) notes at the holding company level under Rule 144A for life, and investors are being guided towards a high-CCC profile, according to sources.

Leonard Green & Partners’ $1.6 billion take-private buyout of the fabric-and-crafts retailer dates to the first quarter of 2011. Financing included a $450 million issue of 8.125% notes due 2019, at par, but the CCC+/Caa1 paper now is pegged at 103, yielding about 7.125%, according to sources.

This will be the sixth regular-way PIK-toggle offering this year, and the fourth that backs a dividend, according to LCD. The three dividend deals were PETCO Animal Supplies last week, healthcare-transportation firm EMSC two weeks ago, and automotive-aftermarket-products company IDQ in July. The two others were LBO offerings for Interline Brands and TransUnion. Of course, Mohegan Tribal Gaming also issued PIK-toggle notes, but it was part of a privately negotiated reorganization.

The similarly-rated PETCO deal completed last week was 8.5% toggle notes due 2017. Pricing was at 99.5, to yield 8.625%, versus initial guidance of 8.75-9%, and it’s now wrapped around 101, yielding about 8.2%, according to sources.

As reported, financing for the Jo-Ann Stores buyout last year included a $650 million covenant-lite term loan. Leonard Green agreed to provide $449.3 million of equity, according to SEC filings. TCW/Crescent also committed to purchase $20 million of equity, with the option to purchase an addition $20 million. – Matt Fuller