Tyco International's $2 billion, five-year revolver with February '06 maturity traded in the 90 context early last week. Its February '03 bank debt was quoted in the 97-97 3/4 context and traders said the paper has been creeping closer to par as the expiration date approaches. The February '03 bank debt was a $3.855 billion, 364-day revolver that was termed out in February this year.
One trader explained that the level where Tyco's '06 bank debt traded was at a premium to the bonds when compared on a relative value basis with the company's similarly termed bonds, which were trading in the high 80s at the time. The trade levels are appropriate, however, if investors think that the February '06 paper will get refinanced along with the company's February '03 paper. "Wouldn't you be willing to pay a three-point premium if you were going to get another 10 points in the end?" he questioned. Both credit facilities were issued at the same time in 2001.
Still, others referred to the current credit market conditions that would hinder Tyco from refinancing the '06 bank debt, especially since the company has been the subject of so much negative attention over the last year. "Where would you have to price that paper to get it done?" one trader wondered, adding that Tyco also runs the risk some original lenders would not come back for more.