The new Michael Foods bank debt traded up as high as the 102 -102 1/2 range after the paper broke into the secondary market. Traders said technicals and a relatively juicy spread encouraged the loan to inch up. The spread on the floating-rate loan priced at LIBOR plus 3 3/4%. “It’s in the stratosphere. It’s ridiculous,” said one dealer. But he noted that the loan just got done and some people consider that an equivalent to a soft call provision due to the belief that the paper will not be repriced in the near future. Bank of America, Deutsche Bank and UBS lead the deal, which backs Thomas H. Lee Partners $1.05 billion acquisition of Michael Foods (LMW, 11/19). Calls to John Reedy, Michael Food’s cfo, were not returned by press time.
Levi Strauss & Co.’s fixed-rate term loan slipped from its high after the company revised its financial guidance for the full 2003 year. The bank debt, which was said to have hit as high as 105 due to its relatively plush interest rate, fell back to the 102-102 1/2 range this week. The company’s operating margin, excluding restructuring charges, net of reversals, and restructuring-related expenses as a percent of sales is now expected to be 1-2% lower than previously expected. In addition, full year net sales are expected to be down 6-7%, compared to previous guidance, which had expected net sales to be roughly flat.
The term loan is also coming under pressure from the ratings agencies. Last week, Moody’s Investors Service and Fitch Ratings downgraded the company’s senior secured term loan rating to Caa2 and BB-, respectively. Standard & Poor’s placed the ratings on CreditWatch with negative implications. Calls to Joe Maurer, Levi’s v.p. and treasurer, were referred to the spokeswoman, who declined comment beyond a company statement.