J. Crew said mid January that under the settlement it has agreed to amend its merger agreement, pushing the "go-shop" deadline to Feb. 15 and reducing the break-up fee it would pay out if it took a higher offer to $20 million from $27 million. Under the amended agreement, the bidders' right to match competing bids could be eliminated in certain circumstances.
However, later this month the clothing retailer offered initial price guidance on a $1 billion term loan it’s seeking to finance the buyout, according to a person familiar with the negotiations reporting to Business Week. The company will propose an interest rate 3.75 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, the rate banks charge to lend to each other, will have a 1.5 percent floor.
According the veteran business weekly publication, J. Crew is proposing to issue the loan at 99.5 cents on the dollar, the person said, reducing proceeds for the New York- based company and boosting the yield for investors. Bank of America Corp. and Goldman Sachs Group Inc. are arranging the loan. The banks will host a lender meeting today to discuss the terms, the person said.
The clothing retailer, which had outperformed most peers in the beginning of 2010, had cut its outlook in August, saying shoppers were "nervous" and that discounts at rivals were pressuring them.
The retailer, which sells upscale women's and men's apparel, accessories and shoes, expects to earn $2.08-$2.13 a share for the year, while analysts on average were looking at earnings of $2.11, as per Thomson Reuters I/B/E/S.
The company, which was caught in controversies over its sale to TPG Capital and Leonard Green, said it expects inventories to rise in the mid-teens on a percentage basis versus last year at the end of the fourth quarter. It backed its gross margin outlook for the fourth quarter.