Staples Has To Pay Back $2.5B Loan For Office Depot Merger

When it rains, it pours — as Staples is experiencing.

One day after the office supply retailer's long-in-the-works plans to acquire Office Depot were shut down by a U.S. District Court judge, Reuters reported that — as a direct result — Staples must now begin the process of repaying the $2.5 billion loan that was provided to the company by institutional investors for the specific purposes of backing the Staples-Office Depot merger (that now never was).

While the very fact that the loan is no longer necessary is unwelcome news for Staples, the timing of the repayment is also unfortunate for the investors, with Reuters pointing out that the opportunities to redeploy those funds into other ventures happen to be limited in the current credit market.

With the loan being repaid by Staples just three months after it went into escrow, continues the Reuters story, that means that some buyers will be receiving a prompt return on their investment ... but that might not be as welcome a turn of events as it appears objectively, given that institutional loan volume in the credit market dropped 13 percent (to $39.41 billion) in Q1 2016 compared to the same quarter last year.

A credit manager commented to the outlet that investors “own a huge amount of Staples — it’s a very large loan — and there are not a lot of new loans to buy. Everyone will be wrestling with [how to deploy] the cash.”

According to Barclays (which negotiated the deal), investors in the Staples-Office Depot merger loan will be receiving a return at par (100 cents on the dollar) within a few days. Reuters notes that while this is prospectively good news for any investors that bought the loan at $0.99 on the dollar back in January, those that bought in more recently — when the rate was above par (between 100.25 and 100.5 cents) — will obviously take a less welcome loss.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border.

Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.

Click to comment