BJ’s Wholesale Club Seeking Term Loans for $450 Million Dividend

BJ’s Wholesale Club Inc., the retailer which was taken private by Leonard Green & Partners LLP and CVC Capital Partners in a 2011 buyout, is refinancing debt and increasing borrowings to pay a $450 million dividend, according to Standard & Poor’s.

A $1.45 billion first lien loan will pay interest at 3.75 percentage points or 4 percentage points more than the London interbank offered rate, with a 1 percent floor on the lending benchmark, according to a person with knowledge of the offering, who asked not to be identified because terms aren’t set. A $650 million second-lien portion will pay interest at 7.75 percentage points or 8 percentage points more than Libor, also with a 1 percent floor on the benchmark, the person said.

The new debt will have the same maturity as the existing covenant-light loans coming due in 2019 and 2020, which totaled $1.625 billion, according to data compiled by Bloomberg.

BJ’s credit rating was cut to six levels below investment grade to B- from B by S&P, and down to an equivalent B3 by Moody’s Investors Service.

The Westborough, Massachusetts-based company, which was taken private for about $2.8 billion, is paying a higher rate to refinance its first-lien debt, Bloomberg data show.

Its 2019 $1.3 billion loan pays interest at 4.25 percent, Bloomberg data show. The interest on the second-lien portion may be reduced by 1 percentage point.

Deutsche Bank AG, Citigroup Inc., Barclays Plc, Morgan Stanley and Jefferies Group Inc. arranged the financing, the person said.

Michael Gennaro, a spokesman for Los Angeles-based Leonard Green, didn’t immediately return a telephone call seeking a comment.

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