Citibank and Goldman Sachs are preparing to market a $1.3 billion credit forSC Johnson Wax Professional that is expected to score big with institutional investors but present a challenge in its sale to banks. The credit includes a $500 million "B" term loan, set to launch next month, and an $800 million pro rata piece that some relationship lenders have had a peak at but is not yet in the market. A near-starved institutional market is expected to scarf up the "B" tranche as the supply and demand imbalance has left buysiders chasing the same credits. But bankers are reserving judgment on the pro rata, noting some relationship lenders who have seen the deal have walked away.
The loan backs the acquisition of DiverseyLever, Unilever's industrial cleaning business. Officials at Johnson Wax declined to comment, referring questions to bank officials, who did not return repeated calls. One banker noted that lenders are still waiting for more information and clarity on the deal, and the pro rata issue may not be as critical as some in the market say. If it does run into a problem, it would not be the first to do so. Banks have been shunning pro rata pieces for some time. But that issue is compounded by the size of the pro rata portion of the Johnson Wax deal a $400 million revolver and $400 million "A" term loan. A banker familiar with the deal said the plan is to syndicate the pro rata first before going to institutions with the "B" tranche.
But that could take a while. One banker said the agents are looking for $60 million tickets on pro rata, and the leads will have to pay up to get it done. As it stands, pricing on the pro rata is LIBOR plus 31/ 4% with a 1% up-front fee, sources said. The banker said to get banks on board the agents may need to offer a quid pro quo on a bond offering the company is planning: take a piece of the pro rata and get a piece of the bond deal. A $400-500 million bond deal is said to be in the works.
A shift into the institutional tranche is already being touted as a possible option if the pro rata struggles, a banker added. But the revolver needs to reflect the nature of the company's business, which has operations in over 60 countries and demands flexibility in its borrowing. So the company may not want to shift too much out of the revolver.
Senior secured and total leverage is 3.3 and 4.5 times, said a banker. Pricing on the "B" is still to be determined. But it is expected to be in the LIBOR plus 33/ 4% range.