R&R Ice Cream has launched a £315 million (€383.4 million; $533.3 million) high yield bond to refinance existing notes that had been raised to finance private equity firm PAI Partners' acquisition of the company last year, according to a statement released on Tuesday.
Proceeds from the senior secured notes due 2020 will be used to repay the UK ice cream and frozen desserts manufacturer’s outstanding €350 million 8.375 percent notes due 2017, as well as costs, fees and expenses associated with the refinancing.
Credit Suisse and Barclays are arrangers and the bond is expected to price in the next few days.
Total debt after the refinancing is expected to amount to €568 million including €253 million PIK (Payment-In-Kind) Toggle notes due 2018, which were also issued in the original acquisition. There is an undrawn super senior RCF (Revolving Credit Facility) of €60 million (extendable to €75 million) due 2020. It’s understood that there may also be some other minor debt facilities in place.
PAI Partners declined to comment beyond the statement.
PAI Partners acquired R&R, a leading supplier of own-label ice cream in Europe including brands Nestle and Skinny Cow, from Oaktree Capital Management in April 2013. It also acquired the UK-based Fredericks Dairies shortly afterwards, adding brands such as Cadbury.
Moody’s assigned the new bond a B1 rating. “Leverage as of the end of 2013 pro forma for the transaction is considered high, at 5.9x net reported (including cost savings and synergies from Frederick's acquisition) or 7.3x gross Moody's adjusted (excluding these items). However Moody's expects the company to achieve deleveraging during 2014,” the rating agency said.
S&P assigned a B rating, indicating a 30 to 40 percent recovery in the event of a payment default. It affirmed its CCC+ rating on the subordinated toggle notes. S&P highlighted that there is an increased risk of cash leaking outside the restricted group to prepay the PIK toggle notes prior to their maturity. “However, in our opinion, some protection against this leakage comes from the restricted payments test under the documentation for the proposed senior secured notes,” S&P said.