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LPC: PetSmart joins ailing retailers in US secondary loan market
2017年8月23日 / 晚上6点22分 / 3 个月前

LPC: PetSmart joins ailing retailers in US secondary loan market

NEW YORK, Aug 23 (Reuters) - Pet supplies firm PetSmart Inc is the latest US retailer to see its loan fall below 90 percent of face value as technology disruption threatens to boost borrowing costs in the struggling sector.

Nearly a third of US retail loans are now trading at stressed levels, with 31% of broadly syndicated loans bid below 90, according to an August 18 note from Fitch. This is up from 27% in July and from 19% a year earlier in August 2016.

Average bids in the retail sector are now 93.09, which is the lowest level since April 2016, according to Thomson Reuters LPC data. The gap between secondary levels and face value indicates that troubled retailers will face higher borrowing costs going forward as investors demand a higher risk premium.

Bids on PetSmart’s US$4.2bn term loan dropped to 88.92 on Tuesday, which is the lowest level seen since the company signed the loan at a size of US$4.3bn in February 2015 to support its buyout by private equity firm BC Partners, the data shows.

The company’s bonds are also under pressure and hit new lows Tuesday as the unsecured 7.125% notes that backed PetSmart’s buyout fell to 81.625, IFR reported. Secured notes backing the company’s US$3bn acquisition of online competitor Chewy sank to 88.75 and the unsecured notes hit 82. Both bonds priced at par in May.

Strong investor demand allowed PetSmart to reprice its buyout loan in October 2016 to 300bp over Libor from 325bp. The loan hit a high of 100.56 in December 2016 and was trading over par until February, when it started to fall.

The drop became more pronounced after the company announced the acquisition of Chewy on April 18 which was financed with the issuance of US$2bn of high-yield bonds.

The pet supplies retailer joins a slew of brick-and-mortar retail names that are struggling as consumers’ buying preferences move online. Retailers’ shares have tumbled as well as the value of their debt, which is already raising borrowing costs.

Storage supplies shop The Container Store increased pricing and reduced the size of a proposed loan to US$300m from US$315m in July after investors pushed back on the company’s request to extend loan maturities.

The company increased the loan’s interest rate to 700bp over Libor, up from 425bp on a previous deal in March 2013, and paid a 3% fee to get the deal done and extend maturities to August 2021 from April 2019.

The new Container Store loan was trading at around 97.25 to 98 late on Tuesday, sources said, up slightly from the original issue discount of 97.

Additional reporting by Kristen Haunss. Reporting by Jonathan Schwarzberg; Editing By Tessa Walsh and Michelle Sierra

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