Investors have been hearing chatter that the $2 billion "B" loan for General Growth Properties may be repriced. This will be the company's second attempt following an ill-fated move in late April when the real estate investment trust attempted to bypass its lead banks and go straight to investors asking for a 50 basis points price cut on the loan in exchange for a fee of 10 basis points.
Although the play never got done, a month-and-a-half later buyside sources say a bank-led deal to bring pricing down from LIBOR plus 2 1/4% may be in the works.
Bank of America, Lehman Brothers, Credit Suisse First Boston and Wachovia Securities lead the current credit. A spokeswoman at B of A and a banker at Lehman declined comment. Bankers at CSFB and Wachovia did not return calls.
One investor said an April letter from GGP regarding the reprice stated the company would follow up with a phone call, but his firm never received one. Prior to that correspondence, the banks and the company had been in discussions for over three months about whether a repricing was a good move or not. Based on market conditions and trading levels, the company thought a cut was appropriate, but a colder market and lack of bank support proved them wrong.
Despite GGP's decision to go directly to investors, discussions have continued between the company and the banks. Last week an investor heard two banks were planning a repricing, the week before another investor heard it was just one. The names of these banks could not be determined. Bernard Freibaum, GGP executive v.p. and cfo, declined to comment. Lori Wittman, senior v.p., finance and treasurer, did not return a call.
A banker said that had the market not started turning in April, the company may have been able to pull off the cut in pricing. However, it still would have been a tough move without bank support. The loan is now quoted between 100 3/4 - 101 1/8, up from a few weeks ago when the name was quoted at 99 3/4 -100 (LMW 5/20). "The market is hot again and it's trading around 101," said the first investor. If a repricing is brought to the table he would look at it but is not sure his firm would do it. "At some point you get priced out," he explained. GGP's initial suggestion of a 50 basis points reduction was too much, but he might have considered a 25 basis points drop if the request had come from the banks. The banker said he thought there may be some built-in expectation from investors that based on those trading levels, a repricing will have to occur.
The facility also consists of a $500 million revolver and a three-year, $3.65 billion term loan "A." Pricing on the revolver and term loan "A" were set on a pricing grid tied to a debt to capital ratio with the spread between LIBOR plus 1 1/4% and LIBOR plus 2 1/4%.
