Yahoo Finance Whataburger Returns to Loan Market With $2.7 Billion Deal
(Bloomberg) -- Texas burger chain Whataburger is returning to the debt market to cut borrowing costs on its existing leveraged loan and redeem the remaining preferred equity on its balance sheet, finishing a transaction it started earlier this year.
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The restaurant chain, known for its white and orange restaurants and hefty burgers, launched a $2.73 billion leveraged loan offering, according to people familiar with the matter. It will use $2.59 billion of that amount to reprice its existing existing obligation to 275 to 300 basis points over the Secured Overnight Financing Rate while keeping the price at par, based on initial discussions, the people said, asking not to be identified because the information is private.
Its current loan has a margin of 325 basis points over the benchmark.
Meanwhile, an incremental $140 million loan, which will be used to redeem preferred equity, is being discussed at the same margin as the portion that’s being repriced, but with a discounted price of 99.5 to 99.75 cents on the dollar, the people said.
Morgan Stanley is leading the transaction and a lender call was held on Monday at 11 a.m. New York time, the people said. Commitments are due May 9 at 3 p.m. New York time, the people said.
A representative for Whataburger did not immediately respond to a request for comment. Morgan Stanley and BDT & MSD Partners, Whataburger’s owner, declined to comment.
A slowdown in new supply has given issuers an upper hand as they return to the debt market to reprice their loans. Repricing can potentially save leveraged borrowers millions of dollars. But it can be less ideal for investors already holding an issuer’s loan, because they either have to accept a lower coupon or have their holdings repaid before expected, which can hurt returns.
Read More: Companies Flood Markets With Debt Sales as Rates Fears Ease
Whataburger issued a $340 million leveraged loan earlier this year to redeem a portion of its outstanding preferred equity. Monday’s issuance will fund the redemption of the remaining preferred stock, the people said.
--With assistance from Andrew Kostic.
(Updates with pricing discussions in the second and fourth paragraphs. Adds comments lines and updated name of BDT & MSD Partners in the sixth paragraph.)
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