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Toys ‘R’ Us Said to Cancel $1.1 Billion Loan to Cut Costs

March 14 (Bloomberg) -- Toys “R” Us Inc., the world’s biggest toy retailer, canceled a $1.1 billion loan transaction to refinance debt and reduce borrowing costs, according to five people briefed on the matter.

The company, bought by KKR & Co., Bain Capital LLC and Vornado Realty Trust in 2005, had initiated lender negotiations March 7 to re-price a $700 million term loan due September 2016 and raise a new, $400 million term loan due in 7.5 years.

Toys “R” Us follows Swift Transportation Co., the biggest truckload carrier in North America, and Apax Partners LLP-owned Advantage Sales & Marketing LLC in pulling $3.34 billion of loans that would cut borrowing costs. Investors are resisting deals that would reduce their returns as the S&P/LSTA U.S. Leveraged Loan 100 Index declined to 95.36 cents on the dollar as of today from its Feb. 14 peak of 96.48 cents, the highest since Nov. 7, 2007.

Bank of America Corp., JPMorgan Chase & Co., Goldman Sachs Group Inc., Wells Fargo & Co., Credit Suisse Group AG, Citigroup Inc. and Deutsche Bank AG were leading the Toys “R” Us transaction, according to data compiled by Bloomberg.

The Wayne, New Jersey-based company proposed to pay an interest rate 3 percentage points to 3.25 percentage points more than the London interbank offered rate, Bloomberg data show. Libor, the rate banks charge to lend to each other, would have had a 1.25 percent to 1.5 percent floor.

Toys “R” Us planned to issue the loans at par, according to Bloomberg data.

Kathleen Waugh, a spokeswoman for Toys “R” US, didn’t immediately return a telephone message left at her office after regular business hours in New York.

To contact the reporter on this story: Emre Peker in New York at epeker2@bloomberg.net; Kristen Haunss in New York at khaunss@bloomberg.net.

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

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