Bear Stearns has obtained lender consent to put in place a new $550 million greenshoe provision for MetroPCS and concurrently draw on an existing $150 million greenshoe that is priced over par for existing investors. The new $550 million loan will make available to the company a $330 million first lien and a $220 million second lien. Pricing on that deal will be determined when it comes to market. On the existing $150 million, which will allocate today, lenders that consent can purchase a ratable share of the first lien at 101 3/4 and 102 on the second lien, below where the existing tranches are trading. Market players said it could be a first for the bank market.
"I can't think of even one other time [this has happened]," said one investor who is not in the deal said. "In the past banks have tried to do this and it hasn't worked just because buysiders don't think highly of paying over par. [It happens in the] bond market, do a drive by at where it is trading, but it is just never done in the loan market. The chances for it to really happen again, you would need to see something trading really high, like MetroPCS. I wouldn't expect to see it very often, but this might be a precedent of sorts."
At press time, the MetroPCS's current first lien was trading at 102.5-103.5, according to Markit, and the second-lien loan was trading between 103.25-104.5. Pricing on the existing first lien is LIBOR plus 4 1/2% and pricing on the second lien is LIBOR plus 7%. The first lien has hard call protection, set at 103, which will drop to 102 in May, which one market player hypothesized was why it was trading so well.
J. Braxton Carter, senior v.p. and cfo, said the structure was unique. "Given the progress the company has made and the general market conditions, and that the first and second liens were trading at a premium, which qualified for giving it at a premium." But he said the deal has been well received. "I think everybody was very positive. It required consent in the original credit agreement and it had a high consent rate," he said. "I would say reception was very good." A Bear Stearns banker declined comment.
In order to be able to access the $550 million greenshoe, the company needs to file its latest financial records. Any drawings under the greenshoe must be pro rata between the first and second-liens and at least 50% must be used to purchase wireless spectrum.
The bank group also agreed to add $75 million back in the calculation of EBITDA for losses generated by the buildout of new markets. The company has a leverage covenant that restricted how quickly the company could grow, one market player said, because net loss is generated during the buildout of those new markets. The company recently received $746 million from Madison Dearborn Partners and TA Associates. Accel Partners is also a sponsor.
The bank, the historical lead for MetroPCS, first took the deal to the market in May asking for $950 million broken into a $700 million first-lien tranche and a $250 million second lien. It was priced at LIBOR plus 3 3/4% on the first lien and LIBOR plus 5 3/4% on the second (LMW, 5/9). The reception was lukewarm and the initial deal was dropped to a $500 million first lien priced at LIBOR plus 4 1/2% and the $250 million second lien priced at LIBOR plus 7%. The company then asked for the $150 million greenshoe for use when it had more favorable numbers. Carter said the deal was put in place in May for general corporate purposes, including the buildout of expansion markets, such as Los Angeles, Dallas, Fort Worth, Texas, Detroit, Mich. and Orlando, Fla.
