Bankers Trust has committed to provide more than $1 billion of bank financing to Yucaipa Cos. for the planned purchase of Ralphs Supermarkets Inc. for $1.51 billion, including the assumption of debt. A Bankers Trust executive said Thursday that the Yucaipa deal marks the biggest buyout loan commitment by the bank in at least several years.
It's unclear, though, whether Yucaipa will require that much bank debt.
The actual amount of new financing will depend on the extent to which existing bondholders agree to hang on to their bonds and consent to various modifications of covenants and amortization schedules. The size of the bank financing will also be driven by the amount of new funds Yucaipa can raise for the deal in the junk bond market.
Yucaipa and Ralphs together have about $800 million of existing bank debt that will be refinanced as part of the acquisition.
In bidding to lead the deal, Bankers Trust proposed a number of alternatives based on various market scenarios, with the amount of bank financing ranging from $400 million to $1.5 billion.
It's believed that at least several other banks bid to lead the financing, including Citibank and Chase Manhattan Bank. CS First Boston is also said to have bid for the deal through its new leveraged lending team, which operates in conjunction with First Boston's commercial banking affiliate, Credit Suisse.
Bankers Trust led the previous bond offerings for both Yucaipa and Ralphs. That probably gave Bankers Trust a leg up in the bidding, because it is intimately familiar with the covenants and indentures.
In addition to leading the bank financing, Bankers Trust is also advising Yucaipa on gaining consent and exchange agreements from existing bondholders.
Bankers Trust's securities underwriting unit also appears to be well positioned to lead any new junk bond offerings for the acquisition.
Yucaipa, a Los Angeles investment firm specializing in supermarket buyouts, announced a definitive agreement to buy the Ralphs chain Wednesday. The deal will create the largest grocery chain in California.