General Growth Properties is coming back to the loan market to refinance a credit it repriced three months ago. The company has signed on with Banc of America Securities, Wachovia Capital and Eurohypo, a new lead, to arrange syndication of the $3.5 billion deal. A bank meeting is scheduled for tomorrow. There was some grumbling in the market last week that the company was avoiding call premiums the existing deal had soft call protection by refinancing instead of repricing. The new pricing at LIBOR plus 1 1/4% is expected to be pitched almost exclusively to banks, with leads holding large allocations. "At 1 1/4 that spread is lower than what most institutional investors would expect because they are not set up to invest in low spread credits," an individual familiar with the deal said.
The lack of institutional flavor may explain what investors said is one of the more puzzling aspects of the deal: the absence of Lehman Brothers and Credit Suisse. Both banks led the existing deal with B of A and Wachovia. "It seems very odd to me. They [Lehman and Credit Suisse] have been involved with them and this process for a while now and they dropped them just like that? I'd love to be a fly on the wall when that decision was made," one investor said. "The interesting part isn't that they decided to look to refinance and fiddle with the transaction -- they've certainly done that before -- it's that they dropped the banks and replaced them with a European bank like Eurohypo," another buysider said.
But a source familiar with the deal said Credit Suisse and Lehman are less inclined to lead deals that do not have a big institutional component. Wachovia and B of A, as commercial banks, are much more comfortable holding the type of pro rata commitment that GGP is asking for. "It is clearly focused away from institutional banks and more orientated toward commercial banks," he said. Credit Suisse and Lehman may participate in the deal at a lower level.
The new financing is expected to comprise a $650 million revolver and a $2.85 billion "A" term loan. A $1.5 billion bridge to the CMBS market with pricing of LIBOR plus 1 1/4% has already been underwritten. The facility being refinanced consists of a $3.65 billion term loan "A," a $2 billion term loan "C" and a $500 million revolving credit facility. The term loan "A" and revolver are priced at LIBOR plus 2 1/4% and the term loan "C" is priced at LIBOR plus 2% (CIN 10/3).
Calls to Bernard Freibaum, executive v.p. and cfo at GGP, were not returned. A GGP spokesman and a Lehman Brothers banker declined comment. Calls to B of A, Wachovia, Eurohypo and Credit Suisse were also not returned.
