Yahoo Finance Herbalife Sweetens Yields, Covenants on $1.2 Billion Debt Sale
(Bloomberg) -- Herbalife Ltd. is looking to attract investors to its leveraged loan and bond deal by offering hefty yields and lender-friendly protections after initial tepid demand, according to people familiar with the matter.
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Pricing discussions on the nutritional company’s $500 million leveraged loan were hiked to 675 basis points over the Secured Overnight Financing Rate and a discounted price of 96 cents on the dollar, significantly wider than initial discussions between 550 to 575 basis points over the benchmark and 97 cents. Price talk on its $700 million bond is for an all-in yield in the 12.5% area, which would be one of the highest for a bond issued this year, the people said.
Investors pushed for more protections following a call with management in which executives extolled the financial virtues of Herbalife’s distributor program and how it has enriched them, people with knowledge of the matter said. A representative for Citigroup Inc., which is leading the transaction, declined to comment. A representative for Herbalife didn’t respond to a request for comment.
Herbalife has a direct selling business model in which distributors resell their weight management, nutrition and energy products, according to regulatory filings. The company has 2 million distributors globally as of the end of 2023, the filing said. Distributors can earn money by selling products they buy at a discount or sponsoring other members.
Proceeds from the debt sale will be used to refinance its senior secured credit facilities and a portion of its notes due 2025.
Herbalife’s stock and existing debt have been under pressure all week as the company marketed the new debt. The company’s shares have declined around 18% so far this week, while its 4.875% notes due 2029 last changed hands at 65.5 cents, down from roughly 70 cents at the end of March, according to pricing source Trace.
The loan carries call protections that are common for riskier deals, including a hard call at 102 cents on the dollar and amortization that is higher than a typical leveraged loan, the people said. S&P Global Ratings assigned a B+ rating to the loan.
Herbalife’s bond was initially expected to price Wednesday, but books now close at 2 p.m. New York time on Thursday. Recommittments on the loan are due at the same time.
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