El Pollo Loco Sets IPO Terms, Remains Above Original Estimates

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El Pollo Loco Holdings has set its formal terms for an initial public offering (IPO). Be advised that these terms can change before the formal IPO, literally up until the final hours ahead of the event.

The company has registered to sell some 7,142,857 shares and has set the price at $13 to $15 per share. The company said that it will list under the stock ticker LOCO on the Nasdaq Global Select Market.

The lead underwriters are Jefferies, Morgan Stanley and Baird. Co-managers were listed as William Blair and Stifel. If the overallotment option is exercised in full, the sale now would be for some 8,214,286 shares.

El Pollo Loco’s original IPO filing reference was for up to $100 million in common stock. Its amended filing did not signal the formal overallotment share count. That top $15 price at the full overallotment-included share count would imply an offering valued at roughly $123 million.

Our initial coverage outlined what the company looks like, and this will be updated when the initial public offering comes closer.

The use of proceeds from the initial public offering is longer than the traditional “for general corporate purposes” we see in so many other IPO filings. Pollo Loco’s filing says:

The net proceeds to us from the sale of the 7,142,857 shares of common stock offered hereby are estimated to be approximately $90.3 million, or $104.2 million if the underwriters exercise their option to purchase additional shares of common stock in full, assuming an initial public offering price of $14.00 per share (the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus) and after deducting underwriting discounts and commissions and expected offering expenses payable by us. We intend to use the net proceeds from this offering to repay in whole or in part our existing Second Lien Term Loan Facility.

Our $100 million Second Lien Term Loan Facility matures on April 11, 2019 and bears interest at an adjusted LIBOR or Alternate Base Rate plus an applicable margin. The applicable margin rate is 8.50% with respect to adjusted LIBOR advances and 7.50% with respect to Alternate Base Rate advances. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Debt and Other Obligations — Senior Secured Credit Facilities.” We intend to repay $100 million of the outstanding principal amount of our Second Lien Term Loan Facility and $1.5 million in prepayment penalties and fees with the proceeds from this offering and approximately $11.3 million of available cash from our Consolidated Balance sheet. In the 2013 Refinancing, the proceeds from our $100 million Second Lien Term Loan Facility were used to refinance substantially all of our $105 million 17% Second Priority Senior Secured Notes due 2018.

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The company further said, “An affiliate of one of the underwriters is a lender under our Second Lien Term Loan Facility and will receive a portion of the proceeds of this offering.” Tuesday’s amended IPO filing tombstone can be seen below:

Pollo Loco Tombstone 2

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