J.P. Morgan, CSFB Muscle In On AFC Lead

J.P. Morgan and Credit Suisse First Boston pushed out incumbent leads CIBC World Markets and Goldman Sachs to lead the $275 million refinancing for AFC Enterprises by offering cheaper pricing. "CIBC and Goldman were interested in being the lead arrangers, but J.P Morgan and CSFB offered the best pricing and capability in the credit markets," noted Gerald Wilkins, executive v.p. and cfo of AFC. "CSFB has developed a strong relationship with the company after a secondary stock offering which they did a great job on," he added.

Explaining the historic relationship with the previous leads, Wilkins said, "CIBC was intimately involved with AFC after a debt for equity swap five years ago left them with 60% of the company. CIBC sold some of this to Freeman Spogli & Co. and after AFC did an IPO, they sold more. With that relationship watered down, AFC began to develop other banking relationships. Goldman was bookrunner on the IPO, with CSFB and Deutsche Bank. "We still talk to both banks, who did a great job," he added, but "competition is always beneficial to everybody. It is the foundation of the capitalist system."

The loan will refinance the existing credit line and retire AFC's 10.25% senior subordinated notes that become callable in May. "We can save 400-500 basis points over the next few years by replacing the notes with senior bank debt," Wilkins said. The $275 million loan comprises a five-year $75 million revolver and $75 million "A" and a seven-year $125 million "B" tranche. Pricing on the pro rata deck is LIBOR plus 2% with a 1/2% commitment fee and the "B" carries a LIBOR plus 21/ 2% spread. AFC operates restaurants, bakeries and cafes. Calls to Goldman and CIBC officials were not returned.