A BB rating from Standard & Poor's for Nalco Co.'s bank debt is likely to bolster syndication of the $1.1 billion "B" loan, according to some bankers who said they were anticipating a B1/B+ rating. Already $500 million is said to be committed and there is speculation that the LIBOR plus 2 3/4% pricing will not hold, despite some loan sources noting that the pricing already looked aggressive for a deal over $1 billion in size. One investor who is considering joining the book said it would not be surprising at all if pricing is cut considering the need for loan investors to find places to park their cash. But bankers also noted it is worth waiting for what Moody's Investors Service will assign before "betting the ranch" on a pricing cut.
Citigroup, Bank of America, J.P. Morgan, Deutsche Bank, Goldman Sachs and UBS are the lead arrangers on the $3.2 bank and bond debt financing. The debt package backs the $4.2 billion purchase of Nalco, a water treatment provider and chemical processor currently owned by French water company Suez, by The Blackstone Group, Apollo Management and Goldman Sachs Capital Partners. Officials at the banks either declined comment or did not return calls. There is also a $300 million "A" loan and a $250 million revolver. The pro rata is priced at LIBOR plus 2 1/2%. Bank One and Royal Bank of Scotland are said to have joined as managing agents.
"Nalco has a strong, above average competitive position," said S&P credit analyst Wesley Chinn. He noted that the cash flows of the company are predictable, with capital expenditure not expected to be high. In addition, bankers said Nalco scored a hit with loan investors by bringing on board William Joyce as ceo. Joyce was previously the ceo of Hercules.