Avis Rent A Car's $875 million term loan traded in the low pars on its break in the secondary market. Traders said the low coupon on the deal the loan is priced at LIBOR plus 1 1/4% - was the reason the loan was trading just above par. It broke at 100 1/8 and continued to trade in that context. JPMorgan and Deutsche Bank lead the financing, which also consists of a $1.5 billion revolver.
Pricing on the term loan was flexed down 25 basis points during syndication because of oversubscription. One trader said that in general, low coupons are causing some investors to pull back from deals, causing those loans to trade poorly in the secondary.
Cendant Corp., the parent of Avis, is using the proceeds from the credit facility, as well as proceeds from a $1 billion note offering, to reduce asset-backed debt. The refinancing is connected to Cendant's plans to split its car rental service, as well as three other divisions real estate, travel distribution and hospitality into four independent, publicly-traded companies by the fall. A spokeswoman for Cendant said in an email that because the term loan is trading above par any characterization of it trading poorly would be unfair.