BJ's launches $2.1 billion loan for refinancing, dividend recap

Thu Oct 31, 2013 5:31pm EDT
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By Natalie Wright and Michelle Sierra

NEW YORK (Reuters) - Warehouse retailer BJ's Wholesale Club BJ.UL is tapping the wide open credit markets for the second time in slightly over 12 months to finance a distribution to its shareholders, sources told Thomson Reuters LPC.

The company is currently in market with a $2.1 billion credit facility that will replace and increase an existing $1.625 billion credit and back a $450 million dividend recapitalization. Deutsche Bank is leading the transaction. Citigroup, Barclays, Jefferies and Morgan Stanley are also lenders in the deal.

Deutsche Bank declined to comment. BJ's did not return a call for comment by press time.

The $450 million dividend comes on the heels of a $643 million distribution the company offered to shareholders in September 2012. It also follows recent debt-financed dividends that companies such as Arby's and Pacific Architects & Engineers have used to funnel money to shareholders in recent days given the limited opportunities to monetize investments that result from a sluggish mergers and acquisitions market.

"The sponsors are finding a way to extract equity," said Charles O'Shea, vice president and senior analyst at Moody's Investors Service. "They're taking advantage of the low interest rate environment where investors are looking for yield."

On the dividend recap, Moody's downgraded BJ's corporate credit ratings to B3 from B2. Moody's assigned a B3 to BJ's new first-lien term loan, and a Caa2 to the company's new second-lien term loan.

The Standard & Poor's issuer credit rating is B-. First-lien ratings are B- and second-lien ratings are CCC.

DIVIDEND DEAL   Continued...

Shoppers leave a BJ's store in Alexandria Virginia August 20, 2008. REUTERS/Kevin Lamarque