Weight Watchers Announces Debt Refinancing

Weight Watchers International, Inc. WTW today announced that it has successfully refinanced its long-term debt. Weight Watchers used the proceeds from its new term loans to pay off the outstanding borrowings under its previous term loans and revolving credit facilities. Mr. Nicholas Hotchkin, Chief Financial Officer of the Company, commenting on the refinancing noted, "As we have indicated before, we are always open to ways to further optimize our capital structure. Our decision to refinance was driven by a unique opportunity to take advantage of robust debt market conditions so that we have greater flexibility to execute our long-term strategic growth agenda, which includes B2B and healthcare as well as opportunistic franchise acquisitions." As part of the transaction, the Company's term debt remains $2.4 billion in aggregate principal amount but consists of a new seven year $2.1 billion institutional term loan with an interest rate of LIBOR + 300bp with a 75bp LIBOR floor and a new three year $0.3 billion institutional term loan with an interest rate of LIBOR + 275bp and no floor. The new term loans have a "covenant-lite" structure, a repayment schedule of 1% of principal per annum prior to maturity and are fully pre-payable. This represents a multi-year extension on the maturity dates from the Company's previous term loan facilities. In addition, the Company also announced a new $250 million revolving credit facility with a maturity date of April 2018. Borrowings under the new revolving credit facility will bear interest at rates determined by leverage levels. At the Company's current leverage level, borrowings under the new revolving credit facility will bear interest at a rate of LIBOR + 225bp. Accordingly, Weight Watchers announced today that it will prepay its Term B Loan due 2014, Term C Loan due 2015, Term D Loan due 2016, Term E Loan due 2017 and Term F Loan due 2019 with the proceeds from this transaction. All term loans will be prepaid at par. The Company expects the annualized impact of the new capital structure to be approximately an incremental $18.0 million of interest expense or $0.20 per fully diluted share. For 2013, the partial year impact is expected to be approximately $14.0 million or $0.15 per fully diluted share of incremental interest expense versus previous expectations. There will also be a one-time charge associated with the partial write-off of prior refinancing fees which is excluded from the above provided interest expense outlook. Hotchkin continued, "We are pleased with the strong demonstration of support from the banking and institutional loan community with regard to the strength of our business and strategic outlook. Further, we now also have greater visibility into the anticipated benefits of our cost savings initiative such that we believe these savings will more than offset the new and higher expected 2013 interest expense. We intend to update investors more broadly on our 2013 outlook when we report earnings for the first quarter of fiscal 2013 in early May."