IASIS Healthcare's $463 million refinancing, led by BNP Paribas and Bank of America, and Goldman Sachs' $350 million "B" term loan for Verizon Wireless of the East were both pulled from the market last week as investors demanded terms unacceptable to the issuer in an environment starkly different to just last month. IASIS, a healthcare company with improving performance, was looking to opportunistically cut pricing and push out maturities, explained John Doyle, treasurer. "Six weeks ago it would have been a slam dunk," he said. The banks were able to build the book, but only after flexing pricing from LIBOR plus 31/ 2% to LIBOR plus 4% on the $339 million "B" term loan, he noted. This flex up in pricing was so steep that the deal no longer made sense for the company.
Some buysiders expressed concern over IASIS' plan, noting that performance may have improved but there have been several years of difficulty. But Doyle is confident that not only will IASIS continue to improve, the market will accept the new pricing at a later date. "We will be an attractive story in a quarter or two and go out for 350," he said. One buysider who looked at the deal agreed, adding, "If they can post another positive quarter, they will be back." Doyle emphasized that the yanking of the credit was market driven and not caused by negative sentiment regarding the company.
Verizon, despite being a single-A telecom name, still struggled to pull the deal through the market. The loan was being shopped at 98 with a coupon of LIBOR plus 43/ 4%. In addition, investors were being offered call protection at 105 in the first year and 102.5 in the second year, thereby preventing Verizon from refinancing out early if conditions improve. But instead of opting to use the term loan, Verizon went with internal funding, a banker said. "The cost of the deal became prohibitive," she added. Goldman bankers declined to comment, and Paul D'Auria, treasurer of Verizon, did not return calls.
The massive investor demands produced remarks that investors are looking to get ground back after the repricings that dominated much of the year (LMW, 8/12). "Demand has slackened as we evaluate the shocks in the equity markets," one buysider said. Another pointed out the lack of demand from collateralized loan obligations and retail funds. But whatever the reason, there's no question the market has shifted.