Traders blamed generally weak secondary market conditions for the dip in trading levels of J. Crew's $285 million term loan after it broke in the secondary market last week. The loan broke at 100 1/4 and dipped to 100 1/8. Market conditions are generally weak because of investor pushback, particularly on low coupon deals priced in the LIBOR plus 1 3/4% range, said traders. Some of these deals, such as Dole Food Co. and Cablevision Systems, are trading slightly below par.
J. Crew's term loan is still reasonably attractive to investors because its LIBOR plus 2 1/4% coupon is among the higher priced deals in the market, said a trader. He said collateralized loan obligations in particular are interested in buying the loan. "It fits CLO criteria in terms of coupon and ratings," he said. "There are a lot of CLOs looking for deals priced around LIBOR plus 250 [basis points]. In a wave of repricings, it is hard to find deals at LIBOR plus 250."
Original price talk on J.Crew's term loan was
LIBOR plus 2 1/2% (CIN 4/28). It was cut by 25 basis points because of oversubscription. Goldman Sachs and Bear Stearns are joint lead arrangers and joint bookrunners. The credit agreement has an accordion feature that allows the company to increase borrowing under the loan by up to $385 million on a one-time basis before Dec. 31, 2006. The company will use proceeds to pay its 9 3/4% '14 senior subordinated notes. Calls to James Scully, cfo, were not returned.