The first, second and third liens of Reynolds and Reynolds' $2.485 billion financing all broke above par last Tuesday in the secondary market. The $1.64 billion first lien broke at 100 5/8-7/8 and finished the day at 100 1/2-3/4. The $520 million second lien broke at 101-102 1/4 and the $250 million third lien broke at 102 1/2-103 1/2 and dipped to 102-103.
Deutsche Bank and Credit Suisse lead the deal, which finances Reynolds' $2.8 billion acquisition of Universal Computer Systems (CIN, 9/29). Shareholders approved the merger last week. A dealer said trading was most active on the first and second liens. Some investors ended up with smaller allocations on these tranches because the deals were well oversubscribed, which caused heavy trading on the break as some chose to build positions, said a trader. One dealer estimated he traded north of $200 million on the break.
The second lien contains call protection of 102 and 101, while the third lien contains no call protection for two years and then 102, 101. The dealer said the third lien, which is priced at LIBOR plus 7 1/2%, traded more lightly because it sits so far down in the capital structure and has been assigned a 5 recovery rating by Standard & Poor's. "It is a tough piece of debt. People that were interested in it bought what they wanted, so they didn't want to sell," he said. The company chose to do a third lien rather than a bond deal to keep the deal private, according to a banker. "It is just another way of adding in another attractive tranche and keeping it private," said the banker. A company spokesman declined to comment.