The Carlyle Group hit up Wachovia Securities and JPMorgan for a $640 million credit facility last week to finance the acquisition of Oriental Trading Co. from Brentwood Associates. The deal consists of a six-year, $50 million first-lien revolver, a seven-year, $410 million first-lien term loan and a seven-and-a-half year, $180 million second-lien term loan. Pricing could not be determined.
Standard & Poor’s assigned a B rating to the first-lien loans and a CCC+ to the second lien. Debt leverage is expected to increase substantially; with pro forma total debt to EBITDA increasing to about 7 times for the 12 months ended April 1, 2006, from 4.5 times, according to an S&P report.
While some investors are wary of whether the deal will survive, members of the Carlyle Group are not concerned by the leverage projections. “The planned debt level is quite manageable given the company’s long history of strong cash flow generation and impressive growth track record,” said a Carlyle spokesman. “We are confident that financing will proceed as expected.”
Calls to Bill Barnum, co-founder of Brentwood Associates and director of Oriental Trading, were not returned by press time. Calls to a JPMorgan spokeswoman were not returned. A spokeswoman from Wachovia would not confirm details about their involvement in the deal.