Spectrum Brands Seeks $1.1 Billion of Loans to Refinance Debt

Spectrum Brands Holdings Inc., the maker of Kwikset locks and George Foreman grills, is seeking $1.1 billion of loans to refinance bonds, according to a person with knowledge of the transaction.

Credit Suisse Group AG is leading the financing and will host a lender call tomorrow at 11 a.m. in New York, said the person, who asked not to be identified because the information is private. The deal includes a $700 million, four-year term piece and a $400 million portion due in six years. Both loans are covenant-light, meaning they don’t contain financial-maintenance requirements.

Spectrum Brands, which has paid down $100 million of debt so far this year, plans to lower borrowings by an additional $200 million and reduce leverage, or debt to earnings, by the end of the fiscal year on Sept. 30, according to a regulatory filing today. The Madison, Wisconsin-based company had about $3.3 billion of debt at March 31, it said in a May 9 regulatory filing.

“We expect to pay down additional term debt in our current fourth quarter and remain on track to reach a total leverage ratio of approximately 4.4 times or less at the end of fiscal 2013,” Dave Lumley, chief executive officer of Spectrum Brands, said in today’s filing. Leverage had been about 4.8 times when the company controlled by Harbinger Group Inc. presented at the Barclays High Yield Conference on May 22, according to a transcript of the presentation.

Rate Guidance

Spectrum Brands is proposing to pay interest at 2.5 percentage points more than the London interbank offered rate on the four-year portion of debt and 3 percentage points more than Libor on the six-year slice, the person said. The lending benchmark on both loans will have a 1 percent minimum.

The debt will be offered at 99 cents on the dollar, the person said. Lenders must let Credit Suisse know by Aug. 13 whether they will participate in the deal.

Proceeds of the loan will be used to refinance the company’s $950 million of 9.5 percent notes due in June 2018, Spectrum Brands said. The bonds last traded at 110.6 cents on the dollar on Aug. 2 to yield 6.9 percent, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.

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