JohnsonDiversey To Sell $250 Million Payment-In-Kind Bond-Source
20 November 2009 - 6:41PM
Dow Jones News
Janatorial supply company JohnsonDiversey Inc. is planning to
sell $250 million of 10.5 year payment-in-kind or PIK bonds a day
after raising $400 million in the high-yield market, according to
several investors aware of the deal.
The bonds are part of a mutli-pronged refinancing which will
allow the company to pay down existing senior secured loans and
bonds as part of a broader $2.6-billion recapitalization plan, the
investors said.
Proceeds of the payment-in-kind bonds will fund Unilever N.V.'s
(UN UNA.AE) exit from part-ownership of the company. Unilever, the
British-Dutch consumer products giant, owns a third of
JohnsonDiversey and will receive $158 million in cash together with
the $250 million of payment-in-kind notes for its stake, Unilever
announced last month.
The bond deals run along side a $477 million investment by
private equity firm Clayton Dubilier & Rice for a 46% equity
stake in the business.
"The recapitalization will provide the company with the
financial flexibility to accelerate growth in the global commercial
cleaning and hygiene market," JohnsonDiversey said in that
statement.
JohnsonDiversey wasn't immediately available to comment on
Friday's transaction.
The payment-in-kind bonds will yield 10.5%, and they are
expected to price at a discount to par value at around 96 cents
through Goldman Sachs, Citigroup and Morgan Stanley.
The bonds will be structured as a payment-in-kind for the first
five-years, meaning that the company will pay the interest with
more debt rather than in cash.
After five-years, the bonds will become PIK-toggle notes. These
types of notes give a company the flexibility to switch between
cash and credit payments.
PIK toggles grew in popularity between 2005 and 2007 among
speculative-grade issuers and fixed-income investors seeking high
returns during the historic buyout boom.
The easy lending terms of these bonds make it possible for
companies with strained cash flows to keep their heads above water
longer than they otherwise would by deferring interest payments.
The problem is that unless the economy recovers sufficiently to
allow companies to make interest payments on such debt with more
cash, borrowers and also eventually investors could find they have
more debt than expected.
Kenneth Monaghan, head of high-yield credit and portfolio
manager at Rogge Global Partners in New York said JohnsonDiversey's
PIK transaction is something of a special case.
"Its a small overall transaction and for a company that people
like. It's a reflection of that. Someone said they are willing to
take on greater risk to get more exposure to the company," he
said.
-By Kate Haywood, Dow Jones Newswires; 212-416-2218;
kate.haywood@dowjones.com
Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Unilever NV (NYSE:UN)
Historical Stock Chart
Von Jul 2023 bis Jul 2024