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Warner Music Plans $1.05 Billion Junk Bond Sale Before Buyout

Warner Music Group Corp., the record company for artists including Frank Sinatra and Red Hot Chili Peppers, plans to sell $1.05 billion of high-yield bonds before its takeover by Len Blavatnik.

WMG Acquisition Corp. may sell $150 million of 9.5 percent senior secured notes due June 2016 that are an addition to existing bonds, and $695 million of senior debt maturing in October 2018, said a person with knowledge of the transaction. WMG Holdings Corp. plans to offer $200 million of senior bonds due in October 2019, said the person, who declined to be identified because terms aren’t set.

The all-cash acquisition by U.S. billionaire Blavatnik’s Access Industries Holdings LLC is valued at $3.3 billion and will be funded with committed financing from Credit Suisse Group AG and UBS AG and equity funding from Access, the New York-based company said in a May 6 statement. Warner Music’s shareholders agreed to the acquisition at a special meeting held earlier today for $8.25 per share in cash, according to a statement distributed by Marketwire.

Private-equity firms Thomas H. Lee Partners LP, Bain Capital LLC and Providence Equity Partners hold the majority of the company’s common stock, according to data compiled by Bloomberg.

Standard & Poor’s and Fitch Ratings grade Warner Music B+ with a “negative” outlook, while Moody’s Investors Service has a Ba3 ranking, one step higher, with a review for a downgrade, Bloomberg data show. High-yield, high-risk, or junk, debt is rated below Baa3 by Moody’s and lower than BBB- by S&P.

Loan Commitments

The Access affiliate created to buy Warner Music got $1.1 billion in loan commitments from Credit Suisse and UBS to help fund the buyout and repurchase outstanding bonds, according to a June 13 regulatory filing. Warner Music is conducting a tender offer to buy about $882.4 million of outstanding notes, according to a separate statement on June 27.

The new high-yield bonds are set to be issued as soon as next week, said the person with knowledge of the transaction, who declined to be identified because terms aren’t set. The offering may be the largest since Russia’s VimpelCom Ltd. sold $2.2 billion of debt on June 22, Bloomberg data show.

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