Incentivized Cable Credit Draws Commitments, Still Hard Going
The CIBC World Markets and Citibank-led deal for CommScope is reportedly picking up interest after some sweeteners were added, but buyside reticence to invest in primary deals and some credit-specific issues are still making syndication a very tough job, investors said. Responding to investor demands for upside, CIBC and Citibank flexed up pricing 1% from LIBOR plus 3 1/2 % on the $225 million term loan "B", also being offered at a 2 1/2 % discount. Call protection of 103, 102, 101 is also being thrown in and the upfront fees have been bumped up for commitments of $20 million and $10 million. The upfront fee is now 1 1/4 % and 1% from 3/4 % and 1/2 % respectively. Calls to bankers at Citibank and CIBC were not returned.
Still, though the response is muted, with one investor saying 75% of the reluctance is the market, but 25% is credit specific. Investors are shunning the primary market in lieu of the bargains available in the secondary. Secondary offers for infotech-provider names are low. General Cable, for instance, is still par, but has little buyside support and Superior Telecom is pretty distressed, he noted. On the credit side, one investor said the collateral package is complicated and there are some issues with the joint venture. All sectors have their problems right now, but aggressive spending is not being generated, he noted. CommScope is a coaxial cable manufacturer and a supplier of telecommunications cable for LAN. The deal backs a joint venture with Japanese electrical manufacturer Furukawa Electric to buy the fiber-optic cable business of Lucent Techologies. Commenting on what more can be done, a buysider said, primary issuance may have to wait until the secondary levels return to a good level.