After suffering months of shrinking spreads in the undernourished "B" market, buysiders are exacting revenge on Goldman Sachs' $350 million "B" loan for Verizon Wireless of the East. The single-A deal is set to close this week, but only after the loan was sold at 98 with a coupon of LIBOR plus 43/ 4%. In addition, investors would only commit when call protection was added into the mix at 105 in the first year, 102.5 in the second year and par in the third, thereby preventing Verizon from refinancing out early if conditions improve. Goldman bankers declined to comment, and Paul D'Auria, treasurer of Verizon, could not be reached for comment.
The situation has prompted comments from bankers that investors are gaining back ground while they can. "It's revenge for the repricings, the mark-to-market losses and everything that is happening right now," one banker said. Indeed, the juicy spread stands in stark contrast to June's average coupon for double-B loans of LIBOR plus 246 points, the lowest level since August 1998 (LMW, 7/15).
The pricing is outside of where Goldman expected the deal to be two months ago, when the structure was pitched. But since then, WorldCom's cfo has been hauled off in handcuffs, Qwest Communications International is being investigated and Sprint's credit facility has only been half filled, another banker noted. The loan backs Verizon's $1.7 billion acquisition of Price Communications' cellular business.
