Netherlands-based Rabobank last week pulled a $225 million portfolio of food-industry credits from auction after a tepid response from the market. Traders and investors said bids were due last Thursday, but then notice was given the auction was postponed. A Rabobank spokeswoman said there would be no asset sale. "Rabobank remains as committed to food and agri clients as ever before," she said, declining further comment.
One investor speculated the bank pulled the portfolio because it realized it would not be able to get as much for it as initially thought. "The seller probably woke up and realized what it was going to go for and pulled it," he said. He pointed to another portfolio auction Deutsche Bank won that came in under par last week (see story, page 7). The winning bid could not be determined, but the cover bid was 99.426. The investor said the portfolio Deutsche Bank won was more diverse than Rabobank's with more on-the-run names. Once Rabo saw that portfolio come in under par it probably realized its portfolio would come in low too, he said.
Before the auction was postponed, there were predictions that the portfolio would be bid under par because the credits have low coupons. "It will probably go to one of the dealers and they will sit on it," an investor said. A dealer said he found the portfolio unattractive because almost half of it is concentrated in one name Constellation Brands. He said it is unusual for one credit to dominate a portfolio. "It is disingenuous. It looks like they are trying to sell one name and have tried to put some others in there," he said.
The portfolio, the sale of which was first reported on Credit Investment News' Web site last week, contains large chunks of low coupon names. Thirteen credits are in the portfolio, including $11.5 million of American Seafoods Group, $18.2 million of National Beef Packing, $77 million of Constellation Brands' term debt and $28.8 million of its revolver, $27.5 million of SUPERVALU's term loan "A" and an unknown amount of Southern Wine & Spirits' term loan "B."
One investor said Rabobank is adjusting the capital allocation to its U.S. business and is selling existing loans to make room for new business. He added the loan portfolio contains mostly food credits because the food, beverage and agribusiness are Rabobank's main focus in the U.S.