PetSmart said today it started a refinancing process to fund the early redemption, repurchase or repayment in full of all four tranches of its debt, after
postponing a refinancing attempt in October 2020, according to a private disclosure discussing PetSmart which was reviewed by Reorg.
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The pet animal supplies retailer said it expects to enter into a new $2.3 billion senior secured term loan facility, receive an equity contribution of about $1.3 billion from its parent, incur about $1.2 billion of additional secured debt and about $1.15 billion of additional unsecured debt, terminate its existing ABL and enter into a new $750 million senior secured asset based revolving credit facility, the same as the
proposed debt in October 2020.
The company said PetSmart also intends to distribute, directly or indirectly, to its parent, Argos Holdings Inc., and Argos Holdings Inc. intends to distribute to its parent or one of such parent’s subsidiaries all shares of Chewy Inc. common stock currently held by PetSmart and its subsidiaries. Following completion of this Chewy distribution, PetSmart will not directly or indirectly own any shares of Chewy common stock. Accordingly, neither Chewy nor any subsidiary of Chewy will be a subsidiary of PetSmart.
Different from the refinancing attempt last year, PetSmart said an affiliate of the parent intends to pledge a number of shares of Chewy Class B common stock (with a market value, at the time of pricing of the refinancing transactions, of about $4 billion, assuming conversion of such Class B common stock into an equivalent number of shares of Chewy’s Class A common stock and based on the closing price of the Class A common stock of Chewy on the New York Stock Exchange on the pricing date of the additional new secured and unsecured debt) as collateral for the new first lien secured debt, and such affiliate intends to guarantee both the new first lien secured debt and the new unsecured debt.
Pro forma the transactions, PetSmart would have a net leverage of 3.7x through $1.269 billion of LTM to Nov. 1, 2020 adjusted EBITDA, excluding Chewy, the document shows.
For the nine weeks ended Jan. 3, financing adjusted EBITDA was $265 million to $275 million, as preliminary total sales increased 13.1% year over year to $1.52 billion. Quarter-to-date preliminary comps were positive 13.9%, with positive preliminary merchandise comp sales of 18.2% and negative preliminary services comp sales of 18.1%.
PetSmart did not immediately respond to a request for comment after business hours.
--Harvard Zhang