Toys `R' Us to Meet Lenders on $1 Billion Financing

Toys “R” Us Inc., the retailer acquired by KKR & Co., Bain Capital LLC and Vornado Realty Trust in 2005 for $7.5 billion, tomorrow will meet with lenders for $1 billion of debt it’s seeking to refinance existing borrowings, according to people familiar with the negotiations.

Bank of America Corp. and Deutsche Bank Group AG will arrange the $500 million term loan and $500 million bond backing the transaction, said the one of the people, who declined to be identified because the terms are private. Both will be due in six years, the person said.

Toys “R” Us sold $1.68 billion of notes since November and filed in May to raise as much as $800 million in an initial public offering to refinance debt, according to data compiled by Bloomberg. The Wayne, New Jersey-based company joins nearly a dozen issuers this week that announced bond offerings to repay borrowings, including First Data Corp., taken private by KKR for $27.5 billion, and digital-television service provider DirecTV, as speculative-grade borrowers this week marketed or sold a record $12.9 billion of notes amid investor demand.

The new financing will be used to repay all obligations under the company’s existing $800 million secured term loan facility and its existing $181 million senior unsecured credit facility, Toys “R” Us said today in a statement. As of May 1, there was $798 million outstanding under the senior secured term loan, with an interest rate of 4.25 percentage points more than the London interbank offered rate, according to Bloomberg data.

The company said yesterday it had increased the borrowing capacity under its revolving credit line to $1.85 billion from $1.63 billion, and will initially pay an interest rate 2.75 percentage points more than Libor, the rate banks charge to lend to each other. In a revolving credit line, money can be borrowed again once it’s repaid; in a term loan it can’t.

Kathleen Waugh, a Toys “R” Us spokeswoman, didn’t immediately return a message seeking comment.

To contact the reporter on this story: Emre Peker in New York at epeker2@bloomberg.net; Krista Giovacco in New York at kgiovacco1@bloomberg.net.

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