Investors Ready To Click To DIRECTV Tranche

  • 09 Feb 2003
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DIRECTV is set to hit the market Thursday with a $1.55 billion credit that includes an $800 million institutional loan. Deutsche Bank and Bank of America are leading the fully underwritten deal, with Credit Suisse First Boston, Citibank and Goldman Sachs on the agent level. The deal was pitched to senior managing agents last Wednesday.

"They're kicking butt all over the cable world," a trader said of DIRECTV's success in providing direct broadcast satellite service in the U.S. The seven-year "B" loan is coming out of the box with LIBOR plus 3 3/4% pricing, an investor noted. A banker cited the company's total leverage figures at four times with senior leverage at two times. "It doesn't sound bad," the investor said of the credit, explaining that margin figures, as well as satellite maintenance costs, would be aspects of the company worth examining. Bankers on the deal either declined to comment or did not return calls by press time.

"They've done a good job turning around business on the cost side," stated Matthew Harrigan, senior v.p. and analyst at Janco Partners- an investment banking firm focused exclusively on the telecommunications sector. "The economy isn't helping, of course." He noted the general market woes' effect on factors such as subscriber growth. "A number of Hughes [Electronics] businesses are in start-up mode," he added, explaining the parent company's plans to boost profits after its failed $18 billion merger with EchoStar Communications last quarter left it cutting corners to reduce costs.

The credit will refinance Hughes existing debt as well as fund some other cash needs for the company, the banker said. The parent company decided to do the deal through DIRECTV in order to get the best execution, he added. The facility also includes a pro rata five-year $250 million revolver and a $500 million delayed draw "A" loan priced at LIBOR plus 3 1/2%. The investor said that a delayed draw "A" piece could make the pro rata go slower than usual. However, he noted that it could still attract lenders since there is a 125 basis point commitment fee on the undrawn "A" and half of the "A" loan would be drawn at closing. A $1.4 billion bond deal further complements the debt package, with CSFB, Goldman and Citi leading the issuance, an investor said. A DIRECTV official referred questions to a Hughes official who could not be reached by press time.

The hefty institutional tranche follows TRW Automotive's $900 million slug and Penn National's $600 million "B" loan. Investors that were looking for paper just a month ago have been hit with a wave over the past three weeks. But investors said the credit should not be hurt by a prospective paper glut because most are eager to get a piece of the DIRECTTV deal.


  • 09 Feb 2003

GlobalCapital European securitization league table

Rank Lead Manager/Arranger Total Volume $m No. of Deals Share % by Volume
1 Bank of America Merrill Lynch (BAML) 7,026 25 11.95
2 Citi 6,449 21 10.96
3 BNP Paribas 5,093 18 8.66
4 Barclays 4,040 11 6.87
5 Lloyds Bank 3,615 14 6.15

Bookrunners of Global Structured Finance

Rank Lead Manager Amount $m No of issues Share %
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1 Citi 118,624.20 342 12.90%
2 Bank of America Merrill Lynch 99,769.11 286 10.85%
3 Wells Fargo Securities 87,449.35 261 9.51%
4 JPMorgan 67,955.87 206 7.39%
5 Credit Suisse 50,788.13 152 5.52%