Petco Health and Wellness lines up $1.2B term loan for refinancing

A Citi-led arranger group has scheduled a lender call for 10:30 a.m. ET on Feb. 17 to launch a $1.2 billion term loan B for Petco Health and Wellness Co. as part of a refinancing, according to sources. Commitments are due at noon ET on Feb. 24.

Price talk for the seven-year covenant-lite TLB is L+325-350 with a 0.75% Libor floor and an issue price of 99.5. That indicates a yield to maturity of roughly 4.15%-4.41%. Lenders are offered six months of 101 soft call protection.

Additional arrangers are Goldman Sachs, Wells Fargo, BofA Securities, Credit Suisse and UBS.

Proceeds from the TLB, along with a new $500 million asset-based revolving credit facility and $500 million of other secured debt, will be used to refinance the issuer’s existing capital structure.

Emergence of the refinancing effort comes on the heels of upgrades in January by S&P Global Ratings and Moody’s after the company’s completed IPO and debt repayment. Ratings upgraded the corporate and the senior secured ratings on Petco to B-, from CCC+, with a positive outlook, noting that the company reduced debt by roughly $1 billion. Moody’s upgraded Petco’s corporate rating to B2, from Caa1, and the senior secured rating to B2, from B3, with a stable outlook.

The company's existing first-lien term loan due January 2023, issued at PETCO Animal Supplies Inc., is priced at L+325, with a 1% floor, and with a leverage-based step-down.

San Diego-based Petco is a retailer of premium pet food, supplies and services.