DaVita cut pricing for a second time on its $1.04 billion "B" loan, despite its BB-/Ba3 rating, after repricing the credit in July. "We had to get the people to look past the rating and look at the credit quality and performance of the company and the cash flow characteristics of the industry," said Richard Whitney, DaVita's cfo. "The markets were telling us that in spite of our rating, our term loan should be priced lower," Whitney said. "The term loan was trading above par."
In addition, Whitney said the repricings were done in such rapid succession because, on the operating side, the company outperformed its target in profitability, cash flow and deleveraging. The new cut takes the price down from LIBOR plus 21/2% to LIBOR plus 21/4% with a step down to LIBOR plus 2% based on leverage performance. In June, DaVita cut pricing from LIBOR plus 23/4%.
Bank of America led the repricing. B of A was co-lead with Credit Suisse First Boston when the original deal was done in 2002. CSFB led the first repricing. Whitney said DaVita has historically used both banks. The facility also includes a $115 million revolver and $150 million "A" loan that were not affected by the price cut.
In November, buysiders were rumored to be rallying against the repricing (LMW, 11/10). Whitney said the biggest pushback from the market was the ratings. "There are no other deals priced this aggressively," he said. "We believe our ratings are stale and are not indicative of the performance of the company."