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Clear Channel’s lead arranger Citigroup has engaged big-ticket buysiders in discussions about financing large chunks of CCU’s jumbo USD 10.7bn term loan B. For large buyers, the arranger is offering to move it, with leverage, at a discount in the mid-to-high 80s, multiple buysiders said. Investors themselves have expressed interest in participating in non-financed offers for the Libor+ 365bps term loan B in the high 70s, they added.
So far, the officially talked OID for the deal remains in the 90-91 range detailed at the 19 June bank meeting, said a source familiar with the deal. The syndicate is looking to place USD 3bn of the USD 10.7bn term loan. Roughly USD 1bn of the TLB is rumored to have already been sold in advance, as previously reported.
A Citigroup spokesperson declined to comment on the situation. A CCU spokesman declined requests to comment.
Citigroup is rumored to have been canvassing those who can cut checks in the USD 250m - USD 500m area, said two of the buysiders. The bank is thought to have had at least one “large sale” in the “mid-to-high 80s,” where it matched the investor’s commitment with roughly 3x leverage, said a third buysider.
The proposed deal-making is similar to a total-return-swap financing but lacks the same triggers that define those types of deals, the buysiders said. The transaction involves banks lending the buyer capital, while the buyer remains responsible for pricing movements, the buysiders said. At the same time, everything regarding the CCU deal is subject to negotiation and “very customized,” stressed the third buysider.
Despite the deep discount, investors seem to have learned their lesson to remain cautious on new issuance. Goldman Sachs priced LyondellBasell’s USD 2.5bn B-2 tranche at 91 more than four weeks ago and the deal has since slid to 86.76 - 87.5 with a spread to three years of Libor+ 808bps, according to Markit loans. TXU’s Libor+ 350bps loans priced at par in October but subsequently dropped 10 points by February before retracing to 92 - 93 recently, as reported. Alltel’s buyout loans plotted a similar course before Verizon’s bid for the company sent its debt soaring, as reported.
While the deal’s arrangers have been receptive to investor inquiries, one area not discussed during the negotiations is when this deal’s memorandum-of-understanding expires, said two buysiders. Once the MOU expires each bank is free to place their exposure piecemeal and negotiate outside of the agreed upon OID. The first bank to sell a large portion of the loan will then likely set the market clearing price with no influence from the rest of the syndicate, which will then be forced to price their exposure at the same discount to lure buyers.
Some investors want to sit on the sidelines until the MOU expires - believed to be at the end of this month - before making a commitment to the deal, speculated a fourth buysider.
As previously reported, the total financing to fund the company’s re-jiggered acquisition by Bain Capital and Thomas H Lee Partners is split between a six-year USD 1bn asset-based revolver, a six-year USD 1.865bn TLA that will be reduced by any ABL borrowings, a 7.5-year USD 10.7bn TLB, a 7.5-year USD 705.6m TLC that could be paid down with asset sale proceeds, as reported.
The financing package also includes a USD 2bn six-year cash flow revolver priced at Libor+ 340bps with USD 80m drawn at closing, up to USD 750m under a 7.5-year delayed draw TL and a USD 500m 7.5-year delayed draw TL, according to SEC filings. The leads also pledged to place USD 980m of senior unsecured notes and USD 1.33bn of senior unsecured toggle notes.
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