Some investors thought Citigroup might rework the financing for VNU again last week after terms were released Aug. 4 that allowed up to 10 times leverage. But much to investor dismay, Citi allocated the deal last Tuesday and VNUs $4.187 billion U.S. term loan broke at 99 3/8-99 5/8 just under the 99.5 original issue discount added two weeks ago. The tranche is priced at LIBOR plus 2 3/4%. The loan traded actively, but did not manage to get higher than the 99 3/8-99 5/8 context where it broke, a trader said.
The new credit agreement offered what investors described as "loose covenants," which on top of allowing up to 10 times leverage, also allows the company to incur acquisition debt, which may mean it will not de-leverage right away, some investors said.
One investor, only partially joking, said he received 100 emails in an hour regarding it. Last Monday, one portfolio manager predicted the market would push back, but the deal still cleared, with many suspecting Citi held a chunk in order to do so. A Citigroup banker declined comment.
"We declined in the first round leverage was really high," said another investor. "Pricing is too low and it's going to trade low so why would we do it?" Another investor said his firm put in for a small allocation, but also placed an order in the secondary.
The loan portion of the deal was reworked a number of times in order to get the deal through syndication (CIN, 7/31, 8/7). Deutsche Bank, which leads the bond financing, also reworked the bonds (7/31). JPMorgan, ABN AMRO and ING are also participating in the deal. A VNU spokesman did not return calls.
AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co. and Thomas H. Lee Partners are purchasing the Haarlem, Netherlands-based information and media company that owns Billboard Magazine for e7.5 billion.