Financing package of the year: Toys R Us $7.5 billion LBO
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Financing package of the year: Toys R Us $7.5 billion LBO

The international toy vendor’s private equity buyers got what they wanted from a multi-market financing package

At a glance:
Deal type:
$7.5 billion LBO of Toys R Us by Bain Capital, Kohlberg Kravis Roberts, and Vornado Realty Trust, including $6.1 billion of new financing commitments
Lead arrangers: (US financing) Deutsche Bank, Bank of America; (European financing) Deutsche Bank, Barclays Capital, Royal Bank of Scotland
Date: March 2005

Combined bank and bond deals used to be the preferred way to finance leveraged buyouts. That’s no longer the case. As sponsors went after bigger and more complex buyouts in 2005, they came up with new capital markets solutions to suit the cashflow and assets of individual targets. Customized real estate and asset-backed loans and bonds became particularly popular. The October 2005 Neiman Marcus financing [see M&A deal of the year] involved a $600 million asset-backed loan and the buyout of rental car company Hertz involved a large securitization of its vehicle fleet. However, the Toys R Us financing trumped everything else. By the time the refinancing is completed it will have tapped six or seven different asset classes, in Europe and the US, and in three different currencies. The company had three main areas of value: the European Toys R Us business, the global Babies R Us business and real estate owned by the troubled US Toys R Us franchise.

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