PETCO Animal Supplies is driving by the high-yield market with a $550 million issue of five-year (non-call one) senior PIK-toggle notes backing a second dividend to its sponsors. An investor call is planned for 11:00 a.m. EDT, and pricing is expected this afternoon via bookrunners J.P. Morgan, Credit Suisse, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo, according to sources.
This will be the fifth regular-way PIK-toggle offering this year, and the third that backs a dividend, according to LCD. The two dividend deals were healthcare-transportation firm EMSC last month and automotive-aftermarket-products company IDQ in July. The two others were LBO offerings for Interline Brands and TransUnion. Of course, Mohegan also issued PIK-toggle notes, but it was part of a privately negotiated reorganization.
Moreover, this will be the second dividend deal for PETCO since a vintage 2006 take-private buyout of the retailer by Leonard Green & Partners and TPG. The other was a bond-and-loan-financed dividend recapitalization in late 2010. That effort produced a $500 million issue of 9.25% notes due 2018, which priced at par but now are pegged around 111, yielding 5.2%, sources said.
The notes are CCC+/Caa1, and investors are being guided toward that same profile on today’s new issue, which is technically at PETCO Holdings. Issuance is under Rule 144A, for life, according to sources.
The deal is planned to carry a unique call schedule, at 101.5 after one year, rising to 103 after two years. Thereafter, the annual call premium steps down to 101.5, and then par, according to sources. – Matt Fuller
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