The Carlyle Group name may help guide the Wesco Aircraft financing through what might otherwise be a bumpy syndication, market players said. Carlyle is buying the company for $920 million in a transaction expected to be completed by the end of the month, according to a banker. Lehman Brothers is leading the $675 million financing, which launched last Tuesday.
"There are a lot of managers out there that will buy anything with the Carlyle name on it," one investor looking at it said. But despite the name, he still had concerns about the company itself. "At the end of the day, there are really no assets," he said. Valencia, Calif.-based Wesco is a provider of inventory management services and a distributor of aircraft components. Calls to George Hess, cfo, were not returned. A Carlyle spokesman declined comment.
The financing consists of a six-year, $75 million first-lien revolver; a seven-year, $435 million first-lien term loan and an eight-year, $165 million second-lien term loan. Price talk is LIBOR plus 2 1/2% on the first lien and LIBOR plus 6 1/2% on the second, with 102, 101 call protection, according to a banker.
Moody's Investors Service rated the credit's first lien Ba3 and the second Caa1. Standard & Poor's assigned a B+ and 2 recovery rating to the first lien and a B- and a 5 recovery rating to the second, citing weak cash flow projections and risk associated with cyclical demand for commercial aircraft. S&P also said it expects Wesco will use its free cash flow to reduce its high debt level. A second investor said the differential in the Moody's ratings were a turn off. A banker explained that you don't typically see a four notch difference between the first and second lien, but that S&P's rating fell closer to the range the market was anticipating.