The $1.55 billion term loan for Reynolds American broke at par then rose to between 100 1/4 - 100 1/2 last week. Constellation Brands' $2.3 billion "B" loan started trading at 100 1/4 but settled between 100 1/8 to 100 3/8, last week. One trader said the overall tone of the secondary market seemed better toward the end of the week, but that trading volumes continued to be light. "I think a lot people are focused on the forward calendar [and the market is] still under some technical pressure," he said.
Lehman Brothers, JPMorgan, Citigroup and GE Capital lead the Reynolds American financing, which also consists of a $550 million revolver that had been upsized from $500 million. Pricing on the term loan decreased to LIBOR plus 1 7/8% from 2%, and also includes a leverage grid that can step pricing down to LIBOR plus 1 3/4% depending upon third quarter financial statements. A spokesman said the debt trading well reflects "the markets' favorable view of the credit," but he would not comment further. The credit backs Reynolds American's $3.5 billion acquisition of Conwood, the second largest manufacturer of smokeless tobacco products in the U.S. (CIN, 5/15).
The Constellation Brands financing also consists of a $500 million revolver and a $700 million "A" loan. Pricing on the pro rata is LIBOR plus 1 1/4%. The "B" loan is priced at LIBOR plus 1 1/2%. JPMorgan, Citigroup and Scotia Capital lead the deal, which launched May 11 and backs Constellation's acquisition of Vincor International. A spokesman said the company's debt is popular because of its healthy cash flow and its ability to pay down debt or deleverage quickly after an acquisition. He cited the company's $1.36 billion acquisition of Robert Mondavi Corp. in December 2004 and Constellation's ability to reduce debt by about $500 million during the 2006 fiscal year.