NEW YORK — The $5.1 billion acquisition of Neiman Marcus Group Inc. by Texas Pacific Group and Warburg Pincus could close as early as today.
The two private-equity groups will fund the transaction through proceeds from an offering of notes and a new $1.98 billion senior secured term loan facility.
The note offering includes the sale of $700 million in senior unsecured notes at 9 percent and $500 million in senior subordinated notes at 10.375 percent. The senior secured term loan facility includes a new $600 million asset-based revolving credit facility, equity financing and cash on hand of Neiman Marcus.
The original plan to pay for the leveraged buyout of Neiman Marcus was to have an $850 million senior secured note offering as one tranche of a three-part bond deal, but that was scrapped in favor of the $1.98 million term loan following jitters in the high-yield bond markets. The other two parts of the bond deal were also trimmed, with the senior unsecured notes initially set for $750 million and the senior subordinated notes at $575 million. The shifting of debt from the junk bond sector to the credit facility nearly doubled the size of the initial $1 billion term loan.
The high-yield bond market has shown signs of weakness lately, mostly due to the poorer credit quality of offerings last month. Nervousness in the last month has stemmed from higher fuel prices and inflation fears, several financial professionals said. And it’s the strength of the leveraged loan market that many firms have turned to as a means of ensuring completion of financing.
Meanwhile, showing concerns about Neiman Marcus Group’s new financial profile, Standard & Poor’s Friday lowered its ratings on the firm, but said it has a stable outlook and is well-positioned to weather downturns. The change in the corporate credit rating, to “B+” from “BBB,” stemmed from the debt incurred to finance the purchase by Texas Pacific Group and Warburg Pincus.