Bloomin’ Brands announced the completion of a refinancing of its senior secured credit facilities, which is expected to yield $6.0 million in interest savings in 2014. The company plans to reinvest the savings into an acceleration of growth initiatives, including development of a second concept in Brazil.
The new credit facilities provides for senior secured financing of up to $1.125 billion, consisting of a $300.0 million Term Loan A, a $225.0 million Term Loan B, and a $600.0 million revolving credit facility. Before the refinancing, the company had $925 million outstanding on its Term Loan B, which will be paid down to $225 million with the $300 million in proceeds from Term Loan A and $400 million from the revolving credit facility. As of the close of the transaction, the company’s total indebtedness is unchanged with $200 million undrawn on the revolving credit facility.
The interest rate on the Term Loan A loan and revolver are based on the company’s total leverage ratio and can range from LIBOR + 175 to LIBOR +225, with the initial rate LIBOR +200. The rate on the company’s Term Loan B is LIBOR +250.
As a result of the refinancing, the company will incur an $11.0 million to $12.0 million loss of extinguishment and modification of debt, which will be excluded from adjusted EPS in the second quarter.
Analysts are maintaining their 2014 EPS estimate of $1.22 (up 10%), in line with consensus and versus guidance for EPS of at least $1.21. For 2015, our estimate remains $1.48, up 22% and modestly above consensus of $1.45.
While we had expected some of the interest savings to fall through to the bottom line this year, we continue to view Bloomin’s valuation as attractive at roughly 18 times our 2014 estimate versus a casual dining average of 30 times.
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