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Ascena Said Offering Loan-Market Premium to Fund Ann Acquisition

The $1.8 billion loan that Ascena Retail Group Inc. is seeking to fund its purchase of the company behind Ann Taylor and LOFT is being offered at a market premium after the buyer reduced its profit forecast.
By
  • Bloomberg

NEW YORK, United States — The $1.8 billion loan that Ascena Retail Group Inc. is seeking to fund its purchase of the company behind women's apparel brands Ann Taylor and LOFT is being offered at a market premium after the buyer reduced its profit forecast.

The retailer proposed paying as much as 3.75 percentage points more than the London interbank offered rate, with a 0.75 percent minimum on the lending benchmark, according to a person with knowledge of the deal, who asked not to be identified citing lack of authorization to speak publicly on the matter.

The rate on new loans issued by companies with similar ratings averages 3.06 percentage points more than lending benchmarks, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data.

Ascena said in May that it was buying Ann Inc. for $2.16 billion, expecting the deal to close in the second half of this year. Mahwah, N.J.-based Ascena is trying to revive sales after last week saying they were slower than expected at its Dressbarn and Justice stores.

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Earnings in the year through July 25 will be 57 cents to 60 cents a share, excluding some items, down from a previous projection of 70 cents to 75 cents, Ascena said.

Ascena is rated BB by Standard & Poor’s and Ba2 by Moody’s Investors Service, or two levels below investment-grade.

Goldman Sachs Group Inc. and a unit of Guggenheim Partners are arranging the deal for Ascena, said the person with knowledge of the transaction.

The loan marks the biggest syndication deal involving Guggenheim, according to data compiled by Bloomberg. The investment and advisory firm, which has more than $240 billion in assets under management, has been building out its banking operations. Last week, Guggenheim hired Andrew Schwartz from Royal Bank of Canada as head of global credit at the investment- banking division.

By Christine Idzelis, Sridhar Natarajan; editors: Shannon D. Harrington, Mitchell Martin, Kenneth Pringle.

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