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PetSmart Gets Lender Support to Pass Loan Amendment

PetSmart Gets Lender Support to Pass Loan Amendment

(Bloomberg) -- PetSmart Inc. got enough lender support to pass a proposed loan amendment that will tighten restrictions on the company and limit lenders’ rights to pursue further litigation over the retailer’s Chewy.com business, according to people with knowledge of the matter.

The closely held pet superstore received consent from holders of more than 51 percent of the outstanding loan, enough to pass the amendment, said the people who asked not to be identified discussing a private situation. The amendment blocks lenders’ ability to pursue litigation over its transfer of Chewy.com equity out of creditors’ reach.

Representatives for the company and private equity sponsors declined to comment. The company’s $4 billion term loan due 2022 rose 1 cent on the dollar to around 94 cents after news of the passed amendment, according to separate people with knowledge of the pricing.

Phoenix-based PetSmart is entangled in a dispute between its lenders and private equity owners -- a group led by BC Partners -- after it moved a portion of shares in the Chewy.com unit to parent company Argos Holdings and another stake in the online retailer to an unrestricted subsidiary. Lenders argue that PetSmart was insolvent at the time of the transfer and consider it a fraudulent maneuver. The company last year pegged the value of the Chewy unit at $4.45 billion, excluding cash on the balance sheet.

Second Try

This was PetSmart’s second attempt to amend its lending agreement to deal with the Chewy litigation. Its first effort failed to win enough support, and last week PetSmart spoke with lenders to learn why. Based on that process, it launched the second offer to address the holders’ main concerns, people with knowledge of the matter said.

The second proposal provides further lender protections and limits the company’s ability to monetize the 20 percent equity stake of its Chewy.com unit that it had moved out of creditors’ reach, people said earlier this week. On Tuesday, one of PetSmart’s largest loan holders, Apollo Global Management, signed onto the revised proposal.

PetSmart got the majority it needed to pass the loan amendment on April 2, according to a memo sent to lenders and seen by Bloomberg. The company, along with the loan’s administrative agent Wilmington Trust, is in the process of determining which lenders signed on in time to get fees and other benefits. The company said it is hosting an earnings conference call on April 9, a day after it releases results to stakeholders.

--With assistance from Jeannine Amodeo.

To contact the reporter on this story: Katherine Doherty in New York at kdoherty23@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Dan Wilchins, Shannon D. Harrington

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