99 Cents brings on advisors for liability management exercise - Debtwire

99 Cents brings on advisors for liability management exercise

19 September 2017 - 12:00 am

99 Cents Only Stores management is working with Guggenheim and Deutsche Bank to pursue liability management exercises, according to three sources familiar with situation. In an 8-K filed this morning, the retailer said it has commenced discussions with its largest lenders over a potential amend-and-extend deal.


The retailer is looking to extend the maturity date of its USD 592m term loan to January 2022 from January 2019. The proposal would increase the interest by 1% annually on the facility, while the company sponsors Ares and Canada Pension Plan Investment Board will elect to swap their loan holdings – roughly USD 130m in principal – into a new PIK second lien term loan facility priced at Libor+ 725bps.


The discount retailer’s ability to refinance a stack of debt maturities has been a front-and-center issue for the company and investors alike. 99 Cents’ 2019 maturity wall includes a USD 250m 11% unsecured note due December of 2019, and the USD 592m Libor+ 350bps (1% floor) first lien TL due January 2019.


The sponsors also own positions in the 99 Cents USD 250m 11% unsecured notes, in addition to a position in the USD 592m first lien TL.


In 2Q, 99 Cents reported earnings in which net sales increased 8.9% to USD 540.5m. Same-store sales increased 9%, as management cited strength in products priced about USD 1.00 as well as grocery and fresh offerings. Gross margin also increased by 40bps, due in part to lower shrink.


EBITDA in the quarter increased to USD 10m, compared to USD 5m YoY. The results pegged leverage at 15.1x.

99 Cents also amended its revolver to provide a USD 25m last-out term loan due 2021.


The 99 Cents USD 250m 11% unsecured notes traded at 87.708 to yield 19.124% in small lots today, according to MarketAxess. The USD 592m first lien TL is quoted at 95.344/96.969, according to Markit.


Messages left with the company, Deutsche Bank, and with Guggenheim were not returned.