The $390 million "B" loan for bottled water producer and distributor DS Waters Enterprises traded in the 94-95 range up from the mid-80s as lenders negotiated with the company over an amendment. The recovery came on the back of growing demand and a bank meeting meant to appease lenders' concerns and explain the company's course of action, said one buysider.
The debt dropped three weeks ago after the company missed its EBITDA margin of 3.4 times (LMW, 9/3). According to a trader, pricing on the "B" loan has since increased 1% to LIBOR plus 4 1/2% and pricing on the $150 million revolver has also increased 1 1/4% to LIBOR plus 4%. The lenders are also asking for the company to reduce its leverage to below three times before the end of 2006. If the company cannot do this then Groupe Danone and Suntory, who run DS Waters as a joint venture, will have to inject $50 million of new equity into the company, added the trader.
In addition to the communication with lenders, the name also recovered after some hedge funds saw value in the company's assets, the buysider noted. "When one guy steps in to buy it starts to move up a little," another trader added. Last month, Moody's Investors Service downgraded the ratings of DS Waters to B3 from B1 displaying concerns over the leverage. The facility is led by Citigroup and J.P. Morgan. A DS Waters spokeswoman did not return calls.