Rue21 Said to Seek Lender Commitments Today on $544 Million Loan

Rue21 Inc., the teen-clothing retailer being bought by Apax Partners Inc., is seeking commitments today on a $544 million term loan to support the buyout, according to a person with knowledge of the transaction.

The loan, which was increased from an initial $533 million, is being offered to lenders at 80 cents to 82 cents on the dollar, compared with 99 cents previously proposed, said the person, who asked not to be identified because the terms aren’t set. Lenders must submit commitments by 5 p.m. today in New York.

Rue21, which Apax agreed to purchase in May in a transaction valued at $1.1 billion, is offering its loan at a record discount as comparable store sales dropped 12.8 percent for the fiscal month ending Oct. 5, according to a Sept. 26 regulatory filing. Moody’s Investors Service cut its grade on the company to Caa1 from B3 on Oct. 1, citing sales that were weaker than expected.

JPMorgan Chase & Co., Bank of America Corp. and Goldman Sachs Group Inc. committed to provide the acquisition financing, including the term loan, $250 million of subordinated notes and about $270 million of equity contributed by the acquirer.

The loan may pay interest at 4.625 percentage points more than the London interbank offered rate with a 1 percent minimum on the lending benchmark, compared with an initially proposed range of 4.5 percentage points to 4.75 percentage points more than Libor with a 1 percent floor, the person said.

The discount on Rue21 would be the steepest on record and well below the average 99.4 cent issue price on loans sold to non-bank lenders, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.

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