Toys “R” Us Inc., the retailer acquired by KKR & Co., Bain Capital Partners LLC and Vornado Realty Trust in 2005 for $7.5 billion, is said to seek a $1.8 billion revolving line of credit, people familiar with the matter said.
The largest U.S. toy-store will use the revolver to refinance a $1.61 billion credit line that matures in May 2012, the people said, who declined to be identified because the terms are private. The financing will be secured by the company’s receivables and inventory.
Toys “R” Us is seeking to extend the maturity on its credit line as the Wayne, New Jersey-based company tries to improve its credit profile since the 2005 leveraged buyout added debt to its balance sheet. The company, which had long-term debt of $4.9 billion as of May 1, plans to raise as much as $800 million in an initial public offering.
Bank of America Corp. is arranging the financing, one of the people said.
Kathleen Waugh, a Toys “R” Us spokeswoman, declined to comment.
The company’s existing credit line is part of a $2.12 billion loan that was arranged by Bank of America in July 2005. Toys “R” Us also has a $804 million term loan of which $798 million is outstanding, according to data compiled by Bloomberg. The interest on the loan is 4.25 percentage points more than the London interbank offered rate, Bloomberg data show. Libor is the rate banks charge to lend to each other.
Moody’s Investors Service put the retailer’s B2 rating on review for possible upgrade after Toys “R” Us said it would use the proceeds to retire debt.