The repricing for VNU N.V. is being cited by some buysiders as a prime example of voting language that allows all lenders to vote for an amendment even if it affects a tranche in which it does not hold paper.
While some shrug and say it's an aspect of the market, others warn that voting across all tranches could become a serious issue when the market starts to turn. "It is always better to have tranche voting," one portfolio manager said. "Institutional investors should push for class voting. If the market turns in the future, that is probably something that should be incorporated."
Because each tranche has different lenders and repricing and amendments affect various holders differently, some suggest there should be more of a push for class voting. For example, a revolver participant, often times a bank, has different lending--specifically pricing--requirements than a collateralized loan obligation manager.
In the case of VNU, Citigroup was looking to take pricing down on the U.S. term loan by 50 basis points, the euro term loan by 25 and did not ask to change pricing on the revolver. A group of U.S. term loan holders were trying to block the reprice, talking to a number of other managers, but, in one investor's estimation, they "caved" and did not follow through with their protest. The block may have struggled because all holders were voting and revolver holders were offered the addition of quarterly compliance information, which they might have viewed as advantageous. A call to a Citi banker was not returned.
Also included in the language was a yank-a-bank provision, in which, if a lender didn't want to recommit to a deal, they could be paid out at par. Also, if there were enough holders that didn't want to approve the reprice, they could have sold their holdings in the secondary to earn the extra yield. If enough firms started selling in the secondary, trading levels would have dropped and the bank may have begun to think twice about the reprice. As of Thursday afternoon, the loan was being offered across the market at 100 7/8-101 1/8.
"[There were] all these games last week, trying to hit Citi's 101 bid," one of the portfolio managers said. "How much can you force them? Initially I thought the amendment was going to get shot down, but as the week dragged on it looked like it was going to go through." One portfolio manager said he heard that Citi received approval up into the 90s, percentage wise.
Citi, Deutsche Bank, JPMorgan, ABN AMRO and ING lead the credit.
