November 16, 2017 / 7:18 PM / a year ago

LPC: U.S. loan issuers lean on bond market to refinance parts of jumbo loans

NEW YORK (Reuters) - US companies with rocky histories in the leveraged loan market, including vitamin and supplement retailer GNC Holdings Inc, weight loss company Weight Watchers International and specialty drug maker Valeant Pharmaceuticals International, are turning to the high-yield bond market to help refinance large existing loans, sources said. 

Refinancing jumbo loans with a mix of loans and bonds is helping these firms to diversify their investor bases and balance sheets with a greater range of maturities. The bond market generally offers eight- to 10-year maturities while the loan market offers six- or seven-year tenors. 

“It gives these issuers as many options as possible,” an investor said.

GNC is attempting to refinance for the second time this year after a previous loan market attempt failed in May. The company canceled its deal after investors asked for higher pricing to compensate for the risk associated with lending to a ‘brick and mortar’ retailer.

While a slew of companies has chased opportunistic refinancings in recent months amid robust market conditions, GNC faces a pressing 2018 maturity on its revolving credit facility and a 2019 maturity on its term loan, which would put the company at risk of defaulting if the loan is not refinanced.  

The current transaction includes a US$705m term loan due in 2022 and US$500m of secured bonds also due in 2022 that will take out GNC’s existing US$1.13bn term loan and repay US$48m of borrowings under its revolving credit facility.

“They probably got reverse inquiry for a secured bond deal,” an investor speculated.

GNC’s existing debt includes a convertible note due in 2020 that will remain outstanding, a source familiar with the deal said.


Weight Watchers is marketing a US$1.39bn term loan due in 2024 and US$500m of unsecured notes due in 2025, which will be used along with cash on hand to refinance its existing US$1.93bn term loan that matures in 2020 and makes up the entirety of its current capital structure.

Although it has runway on the existing loan, Weight Watchers is likely pursuing the deal now in order to lock in longer-dated financing ahead of its most important quarter, sources said. Its first quarter results, which capture subscriptions driven by food consumption during the holiday period, could boost the clearing yield on any subsequent refinancing if they are underwhelming, sources said.

“Going to avoid the debt before January,” an investor said. “That’s the big sell-in period for their business.”

GNC and lead bank Bank of America Merrill Lynch declined to comment. Weight Watchers and lead bank JP Morgan did not respond to requests for comment.

Valeant has also been seeking to reprice its US$4.6bn term loan due in 2022 in conjunction with a US$750m pay down sourced from proceeds from an offering of new secured notes.

The company is tapping the bond market as it continues to tackle its roughly US$26bn debt stack – which includes several classes of secured and unsecured bonds in addition to the loan – with liability management exercises and debt paydowns from asset sale proceeds. The new bonds, which were issued on Tuesday as an add-on to an existing tranche, will mature three years after the loan, in 2025.

Other than extending Valeant’s maturity profile, the bonds are positioned as a stick to encourage lenders to approve the repricing. The loan market remains low on supply and losing some of their commitment to the bond market should persuade loan investors to hold on to the remaining pieces, a source close to the deal said.   

Valeant wrapped up the loan repricing on Wednesday. The balance on the loan will fall to US$3.8bn following the transactions.

Valeant and lead bank Barclays declined to comment.

Reporting by Andrew Berlin; Editing By Tessa Walsh and Michelle Sierra

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