Wachovia Securities and JPMorgan are expected to be named as the lead banks on a credit backing The Carlyle Group's purchase of Oriental Trading Co. from Brentwood Associates. Wachovia's place as one of the top banks caught the attention of market players, who noted it was an aggressive play by a bank that typically has not been on the left for large cap sponsor deals. The deal structure has not been disclosed, but with an estimated purchase price of $1 billion, the first and second-lien tranches are expected to add up to a number in that neighborhood. A banker at Wachovia referred a call to a spokeswoman, who did not return calls. Calls to a spokeswoman at JPMorgan were not returned.
Credit Suisse and BNP Paribas are the leads on Oriental Trading's existing debt, but they are not expected to be included in the lead arranger tier. CS had been backing a couple of other bidders and when Carlyle shopped around it got what one market player described as tighter terms than other banks were offering. A CS banker declined comment and a call to a BNP banker was not returned by press time.
Wachovia had hired a team from Bank of America back in October 2004, led by Elton Vogel, to bulk up its business with financial sponsors (LMW, 10/4/2004). The source speculated that Wachovia's offer was a way to make a footprint with the sponsor world.
A Carlyle spokesman said Sandra Horbach, Carlyle managing director and head of the consumer and retail team, has had her eyes on Oriental Trading for several years. When Carlyle heard it was on the block, she jumped. JPMorgan conducted the sale process, though the spokesman did not know if the bank contacted Carlyle or the other way around. Horbach was traveling and could not be reached.
According to Markit, Oriental Trading's second lien and term loan "B" have been trading steadily since a slight drop June 9. The $122 million second lien has been trading at 100.75 -101.50 and its $297 million term loan "B" is trading at 100.188 100.813. The term loan "B" dropped from 100.25 and the second lien dropped from 100.875.
Standard & Poor's said it placed Oriental Trading's B+ corporate credit rating on CreditWatch with negative implications. In a release, S&P says that although terms of the transaction have not been disclosed, it is anticipated the transaction will lead to a weaker financial profile because of additional debt on the company's capital structure.
In February 2005 Brentwood turned to CS and BNP to lead a $100 million dividend that was reworked after investors squawked at a deal that took out call protection and paid out at a higher level (2/18/05). Brentwood will retain a minority stake in the company. William Barnum, a co-founder of Brentwood Associates and director of Oriental Trading, did not return calls, nor did a spokeswoman for Oriental Trading.