Targus International's $190 million first-lien term loan broke in the secondary market at 101 last week and traded as high as 101 3/8. The loan will be used to finance Fenway Partners' $420 million acquisition of Targus International from Apax Partners. The loan is priced at LIBOR plus 3%.
The credit also consists of a $85 million second-lien term loan, which is still in syndication. Leads UBS and Goldman put together the second-lien loan after they scrapped a planned bond offering. A trader said pricing on the second lien is being tweaked so that it will get maximum distribution. He said price talk is LIBOR plus 7.5%. "The market is sketchy for second liens. Everyone is asking for more. If a deal is priced at LIBOR plus seven, someone else will ask for LIBOR plus eight," said a trader.
Standard & Poor's assigned a B rating to the first lien term loan. It also assigned a '2' recovery rating to the credit, indicating first lien lenders can expect a 80%-100% recovery of principal if it defaults. The rating agency also assigned a CCC+ rating to the second lien loan. It assigned a '5' recovery rating to the credit, which shows that it expects lenders will obtain a 0-25% recovery of principal if it defaults. Standard & Poor's assigned the same rating to the second lien as they assigned the scrapped $150 million senior subordinated note offering.
Mark Salierno, analyst at S&P, said that in the event of default second-lien creditors can expect only a modest recovery. "If it defaults, the first lien will get a substantial return. The second-lien creditors could get something back, but we anticipate it would be negligible," he said. A Targus spokeswoman did not return calls by press time.