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Buyside Demand Pressures Pricing

18 May 2002

Pressure is mounting to cut pricing on a series of "B" loans, leaving market players to question where the point is when investors will say no. One strong candidate for a flex is Silgan Holdings after institutional commitments topped $1 billion for the $300 million "B" loan. CIBC World Markets is also looking to drop pricing on Shoppers Drug Mart to LIBOR plus 2%, while Credit Suisse First Boston's deal for Playtex Products was launched to the market at LIBOR plus 21/ 2%, but could go to 21/ 4%.

One banker said, "A number of institutions are getting frustrated at the flex downs, but enough investors are in demand of paper to force the pricing lower." Spreads on institutional loans are dropping to levels not seen since the second quarter of 2000 and are now dropping below pro rata pricing (LMW, 5/13). However, another banker said it is still an opportune time to invest in loans. "I'd give up spread all day to get a lower default rate."

Deutsche Bank, Bank of America, Morgan Stanley and Citibank all have roles on the $800 million bank deal for Silgan which also comprises a $400 million, six-year revolver and a $100 million "A" term loan, said a banker. Silgan is looking to refinance to take advantage of the current investor enthusiasm for the paper, said Harley Rankin Jr., executive v.p. and cfo of Silgan (LMW, 5/6). Arthur Konviser, senior v.p., corporate affairs for Shoppers, said the company is always looking at opportunities to refinance, but he declined further comment.

18 May 2002