Freescale Semiconductor's $3.5 billion term loan broke at 100 3/8-5/8 in the secondary market last Tuesday. The loan dipped as low as 100 1/8-3/8 before holding steady at 100 1/4-1/2. One trader said the loan bounced back and forth as investors figured out how much they should be paying for a loan that has a LIBOR plus 2% coupon.
The $3.5 billion term loan is part of Freescale's $4.25 billion credit facility, which backs the $17.6 billion leveraged buyout of the company by a group of investors including The Blackstone Group, The Carlyle Group, Permira Funds and Texas Pacific Group (CIN, 11/3). Citigroup, Credit Suisse, JPMorgan, Lehman Brothers and UBS lead the deal, which also includes a $750 million asset-based revolver.
A buyside trader said he liked the credit because it has a good coupon relative to its ratings. "It is good yield for a credit that has one foot in investment grade," he said. "It has good collateral coverage." Moody's Investors Service assigned a provisional Baa3 to the term loan. It assigned a Ba3 corporate family rating, reflecting its diversified revenue base. Standard & Poor's assigned a BB rating and 1 recovery rating to the term loan. Debt leverage will be about 5.6 times trailing four quarters adjusted EBITDA, according to S&P. This leverage treats pensions, post-retirement benefits and capitalized operating leases as debt. A spokeswoman did not return calls.