EX-99.(C)(5) 5 ex99_c5.htm EXHIBIT (C)(5) ex99_c5.htm
Exhibit (c)(5)
 
Discussion Materials
Project NOBLE
October 3, 2011
Confidential
 
 
 
Project NOBLE
Summary of Best and Final Bid Terms
Source: Revised proposals
communicated by Ares and
Leonard Green on September 20-
October 2.
(1) Stemming from below-
 market interest rate
 proposed by Leonard
 Green. Please see page 19
 for additional details.
(2) Based on unaffected closing
 price of $16.68 on March
 10, 2011, one day prior to
 family joint bid with
 Leonard Green.
(3) Assumes $50 million roll in
 Ares case.
(4) Options vest over 5 years.
 Options will vest 100% if
 terminated without Cause or
 resign for Good Reason, or
 if there is a change of
 control event. Upon
 vesting, holder will have 18
 months following triggering
 event to exercise options.
 Termination for Cause or
 resignation without Good
 Reason will terminate all
 vested and unvested
 options.
(5) Shareholders agreement
 terms include customary tag
 along rights, drag-along
 rights, pre-emptive rights,
 piggyback registration rights,
 approval rights, and rollover
 put.
1
 
 
 
Project NOBLE
Summary of Family Alternatives - Family Proceeds
2
 
 
 
Project NOBLE
Overview of Ares Revised Transaction Proposal(1)
Cash Generation and Debt Paydown ($ in millions)
Credit Statistics ($ in millions)
$22.00 Offer Price, $50 Million Family Roll
________________________
Source: Noble data room model, adjusted for “capital light” operating assumptions in forecasted
years (adjustments primarily associated with leasing of stores); and Ares.
Note: 2016 projected assuming identical number of incremental stores opened as in 2015 and
assuming same EBITDA margin profile.
(1) Based on revised terms communicated by Ares on October 1, 2011.
(2) Ares projected cash balance.
(3) Adjustment to reconcile discrepancies between Ares implied share count and current share
 count. Ares assumes a minimum cash requirement of $12.1.
3
 
 
 
Project NOBLE
Overview of Ares Revised Transaction Proposal(1)
________________________
Source: Noble data room model, adjusted for “capital light” operating assumptions in forecasted years (adjustments primarily associated with leasing of stores); and Ares.
Note: 2016 projected assuming identical number of incremental stores opened as in 2015 and assuming same EBITDA margin profile.
(1) Based on revised terms communicated by Ares on October 1-2, 2011.
(2) Ares proposal designates 5% specifically to the family at a 1.0x initial equity strike price (value shown). In addition to the family’s promote, non-family management is allocated 3% at 1.0x initial equity strike price and
 3% at 1.5x initial equity strike price.
$22.00 Offer Price, $50 Million Family Roll
4
 
 
 
Project NOBLE
Analysis at Various Prices - Ares Revised Transaction Proposal(1)
Source: Noble data room model, adjusted for “capital light” operating assumptions in forecasted years (adjustments primarily associated with leasing of stores).
Note: 2016 projected assuming identical number of incremental stores opened as in 2015 and assuming same EBITDA margin profile.
(1) Based on terms communicated by Ares on October 1-2, 2011.
(2) Based on Q1’2012 LTM EBITDA (excl. SBC) of $149 million.
(3) Equity account adjusts based on increases or decreases in required capital.
$22.00 Offer Price, $50 Million Family Roll
5
 
 
 
Project NOBLE
Overview of Ares Promote Proposals
$22.00 Offer Price, $50 Million Family Roll
________________________
Source: Noble data room model, adjusted for “capital light” operating assumptions in forecasted years (adjustments primarily associated with leasing of stores); Ares initial proposal received September 28, 2011 and revised
terms communicated on October 1-2, 2011.
Note: 2016 projected assuming identical number of incremental stores opened as in 2015 and assuming same EBITDA margin profile.
6
 
 
 
Project NOBLE
Ares Promote Sensitivities
$22.00 Offer Price, $50 Million Family Roll
Ares Initial Proposal
Family Counterproposal
Ares Revised / Current Proposal
________________________
Source: Noble data room model, adjusted for “capital light” operating assumptions in forecasted years (adjustments primarily associated with leasing of stores); Ares initial proposal received September 28, 2011 and revised
terms communicated on October 1-2, 2011.
Note: 2016 projected assuming identical number of incremental stores opened as in 2015 and assuming same EBITDA margin profile.
7
 
 
 
Project NOBLE
Summary Terms for Ares Debt Capital Commitments
   
 
Ares Commitment Letter
Adjustments for Flex
Max Flex
Asset-Backed Revolver
 
 
 
Facility Size
$150
 
 
Term
5 years
 
 
Interest Rate
(Fee on Unused Capacity)
Tiered: L + Spread(1)
>$90: 175 bps (50 bps)
$40 to $90: 200 bps (37.5 bps)
>$40: 225 bps (37.5 bps)
 
 
Current Yield
2.24%
 
 
Drawn at Close
$0
 
 
Underwriting Fee
1.25%
 
 
Upfront Fee
0.50%
 
 
Financial Covenants
Minimum Fixed Charge Ratio: 1.0 : 1.0
 
 
Covenant Trigger Event
Minimum Excess availability of $10m;
or 12.5% of Line Cap
 
 
Borrowing Base
-90% of credit card receivables
- 90% of net orderly liquidation value
- Less: reserves
 
 
Security
1st priority perfected security interest in all cash,
cash equivalents, accounts receivable, inventory
and IP
 
 
 
 
 
 
 
 
 
 
________________________
Source: Ares’ Commitment Letter and Fee Letter and discussions from Ares.
(1)L+200 for first 6 months, regardless of revolver utilization.
8
 
 
 
 
Project NOBLE
Summary Terms for Ares Debt Capital Commitments (cont’d)
   
 
Ares Commitment Letter
Adjustments for Flex
Max Flex
Senior Secured  Term Loan B
 
 
 
Size
$525
 
 
Interest Rate
L + 600 bps
 
 
LIBOR Floor
150 bps
 
 
Current Yield
7.50%
 
 
Maturity
7 years
 
 
Amortization
1.00% annually
 
 
Underwriting / Arrangement Fee
2.5%
 
 
Upfront Fees
2.0%
 
 
Mandatory Prepayments
50% of Excess Free Cash Flow
Stepping down based on leverage thresholds
 
 
Optional Prepayment
Yes, without penalty;
1% premium upon Soft Call within 1 year
 
 
Mandatory Hedging
50% of balance for a minimum of 2.5 years
 
 
Financial Covenants
Maximum Leverage Ratio:
Declining based on a non-cumulative/
static cushion of 30%
 
 
________________________
Source: Ares’ Commitment Letter and Fee Letter and discussions from Ares.
9
 
 
 
Project NOBLE
Summary Terms for Ares Debt Capital Commitments (cont’d)
   
 
Ares Commitment Letter
Adjustments for Flex
Max Flex
Senior Unsecured Bridge
 
 
 
Size
$250
 
 
Interest Rate
L + 950 bps
Steps up 50 bps per quarter after the 3rd
month from Closing
 
 
LIBOR Floor
150 bps
 
 
Current Yield
11.00%
 
 
Maturity
1 year
 
 
Commitment Fee
1.5%
 
 
Takedown Fee(1)
1.5%
 
 
Extension Fee(2)
2.5%
 
 
Conversion / Extension
Into Unsecured Term Loans
after 1 year from Closing;
maturing 8 years after Closing
 
 
Lending Group
Royal Bank of Canada
 
 
Additional
Sponsors have the right to purchase
 
 
________________________
Source: Ares’ Commitment Letter and Fee Letter and discussions from Ares.
(1)A fee paid to the extent any Bridge Loans are made on the Closing Date. Fees based on the actual borrowings.
(2)A fee paid to the extent any Bridge Loans are outstanding upon the initial 1 year maturity date. Fees based on the balance of Bridge Loans outstanding on the initial 1 year maturity after Closing.
10
 
 
 
Project NOBLE
Leverage Loan and Bond Spreads Over Time
________________________
Source: Bloomberg and Barclays.
11
 
 
 
 
 
 
Project NOBLE
BJ’s Wholesale Club Acquisition Financing
________________________
Source: Company materials.
(1)ABL draw of $465 million includes $65 million for seasonal working capital which is not included in leverage multiples.
(2)Downsized from $1,125 million.
(3)Based on LTM Adjusted EBITDA of $389 million; reduced from $436 million due to incremental rent expense of $36.5 million associated with the expected sale leaseback transactions.
(4)Rent expense capitalized at 8x. Based on LTM Adjusted EBITDAR of $612 million.
Additional Financing Terms 
n Pricing revised wider:
 · 1st Lien at 96.0, down from 97.5
 · 2nd Lien at 95.0, down from 97.0
n 1st Lien: 1% yearly amortization, 101 soft call for year 1
n 2nd Lien: no amortization, optional prepayments (103/102/101)
n 75% excess cash flow Sweep
n Expected rating: B2/B
On June 28, 2011, BJ’s entered into a definitive agreement to be acquired by Leonard Green &
Partners and CVC Capital Partners in an all-cash transaction valued at approximately $2.8 billion
13
 
 
 
Project NOBLE
Comparison of Retail Financings
Source: Company filings, Bloomberg and FactSet.
Note: Revenue and EBITDA figures are LTM as of the respective transaction dates.
14
 
 
 
Project NOBLE
Recent Leverage Loan Financings and Yields
15
 
 
 
Project NOBLE
Recent High Yield Bond Offerings and Yields
16
 
 
 
 
     
     
     
     
     
 
 
 
 
     
     
     
 
 
 
Appendices
 
 
 
Project NOBLE
Value of Leonard Green’s Proposed Preferred Security for the Family
n We believe that the Preferred Security proposed by Leonard Green is worth less than par given its subordination and paid-in-
 kind interest rate
 · Market rate for the proposed preferred equity capital should be in the 15%-16% range, considering that the mezzanine debt tranche which sits
 ahead of the proposed preferred in the capital structure will have an interest rate of 12.25%
n Assuming 15% is the appropriate PIK rate, the value of the Preferred Security would be approximately $41 million
19
 
 
 
Project NOBLE
Noble’s Relative Market Multiples
CY2011E P/E
CY2011E
P/E to Growth
Enterprise Value /
CY2011E EBITDA
Note: Medians exclude Food & Drug and Club & Mass merchandise, as well as Noble.
Note: Food & Drug is a simple average and includes Safeway, Kroger, Supervalu, Whole Foods, CVS, Rite Aid and Walgreens.
  Club & Mass Merchandise is a simple average and includes BJ’s, Costco, Target and Walmart.
Current Median: 8.4x
Current Median: 16.3x

 
Ares offer at $22.00 per share
Current Multiple
20
 
 
 
Project NOBLE
Historical NTM EV / EBITDA Multiples Over Time
________________________
Source: Wall Street consensus median estimates and FactSet as of September 28, 2011.
Annual Median NTM EV / EBITDA Multiples 
21
 
 
 
Project NOBLE
Comparison of Selected Companies
________________________
Source: Company filings, Wall Street consensus estimates and FactSet as of September 28, 2011.
Note: $ in millions
22