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Bain's Burlington Pulls Dividend Financing as Payout Deals Surge Fivefold

Burlington Coat Factory Warehouse Corp., the discount clothing-store operator, pulled $1.5 billion of debt financing it planned to repay borrowings and fund a dividend to owner Bain Capital LLC, according to eight people familiar with the negotiations.

JPMorgan Chase & Co. was marketing a $1 billion term loan for the transaction and told investors in e-mails and phone calls today that the financing had been withdrawn, said the people, who declined to be identified because the terms are private. Goldman Sachs Group Inc. was arranging $500 million of notes.

Burlington failed to take advantage of rallies in the high- risk, high-yield loan and bond markets as issuers led by Dunkin’ Brands Inc., another Bain company, and Petco Animal Supplies Inc., owned by Leonard Green & Partners LP and TPG Capital, tightened pricing and completed debt financings to fund payouts to private-equity firms. Dividend-related speculative-grade bond and loan sales are accelerating, with issuance this year rising fivefold from last year to at least $37 billion, according to data compiled by Bloomberg and Standard & Poor’s Leveraged Commentary & Data.

Robert LaPenta, treasurer of Burlington, didn’t immediately return a message left at his office.

Bain bought Burlington for $1.87 billion in 2006, according to data compiled by Bloomberg. The clothing-store company was planning to fund a $325 million payout to the Boston-based private-equity firm.

Loan Drops

Burlington’s $900 million term loan due May 2013 fell about three points to 97.25 cents on the dollar, following news the financing package was pulled, said three people familiar with the trades. As of Aug. 31, there was $850.3 million outstanding under the facility, according to data compiled by Bloomberg.

JPMorgan initiated lender talks for the new term loan Nov. 5, when Burlington offered to pay an interest rate 5.25 percentage points more than the London interbank offered rate. Libor, the rate banks charge to lend to each other, would have a 1.75 percent floor.

Burlington also proposed to issue the debt at 98.5 cents on the dollar, reducing proceeds for the company and boosting the yield for investors.

Investors considering the transaction said pricing for the loan was too low considering its B3 rating by Moody’s Investors Service and the B- grade assigned to it by Standard & Poor’s.

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.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net.

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