Beats Electronics LLC, the headphone company founded by music producer Jimmy Iovine and rapper Dr. Dre, is seeking $700 million in loans for a dividend and to repay debt, according to a person with knowledge of the matter.
Barclays Plc, Citigroup Inc. and JPMorgan Chase & Co. are arranging the financing, which includes a $500 million term loan B and a $200 million revolving line of credit, said the person, who asked not to be identified because terms are private. The banks will hold a lender meeting on May 29 at noon in New York.
There’s been about $33 billion of loans sold to support dividend transactions year to date, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data. That compares with $56.4 billion in loans to support dividends in all of 2012.
“We’ve seen an increase in the number of leveraged loans used to fund dividends to financial sponsors,” Lenny Ajzenman, an analyst at Moody’s Investors Service in New York, said in a telephone interview. “The loan market is attractive for sponsors because of low rates, the ability to prepay debt and covenant-light structures.”
Beats, based in Santa Monica, California, obtained a $225 million loan last July for working capital, according to data compiled by Bloomberg. The one-year debt, arranged by Citigroup Inc., pays interest at 1.5 percentage points more than the London interbank offered rate, Bloomberg data show.
Jessica Bass, a spokeswoman for the company, couldn’t immediately provide comment.
In a revolving line of credit, money can be borrowed again once it’s repaid; in a term loan it can’t.
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