Jack in the Box Inc. (
recently announced the completion of a bank debt refinance with a
new senior credit facility worth $600 million. The five-year
facility, with current interest rate of LIBOR plus 2.0%, includes
a $200 million term loan and $400 million of revolving credit
facility. However, based on the company's leverage ratio, the
interest rate varies between LIBOR plus 1.75% to 2.25%.
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The joint lead arrangers and book running managers for the
transaction were Wells Fargo Securities, LLC, a unit of
Wells Fargo & Company (
and Merrill Lynch, Pierce, Fenner & Smith Incorporated - a
Bank of America Corporation (
JACK intends to use the proceeds from the transaction to pay off
the existing senior credit facility worth $600 million, having
its maturity in June 2015. The company will draw around $220
million of the revolving credit facility and $200 million will be
outstanding on the term loan, as of the closing. As the company
has replaced the existing credit facility prior to its
maturation, it will incur a deferred financing fees expense worth
$0.8 million in the first quarter of fiscal 2013.
In connection with the term loan, the company will be required to
pay the principal amount of $20 million in each of the first four
years and balance in the fifth year, after closing the
transaction. Both the facilities will mature in November 2017.
Management expects its refinancing activity to help the company
to achieve its strategic plan of forming a long term flexible
capital structure, by gaining from low interest rate advantage.
Moreover, the company also looks forward to enhancing shareholder
value, as the new credit facility provides for around $500
million for share repurchases and dividend payments.
As of July 8, 2012, JACK has cash and cash equivalent of $10.8
million and long term debt, net of current maturities, of $430.4
million. As of July 8, 2012, the company had a total of 2,861
restaurants, including 890 company based and 1,971 franchised
We currently have long term Neutral recommendation on JACK. It
carries a short term Zacks #3 rank (Hold).