Alaris Medical Systems could not pass up the opportunity to cut the spread on it bank debt when approached by Citibank , said William Bopp, senior v.p. and cfo. Bopp said he understands that investors are being pressured by the spate of repricings in the market, and he concedes that investors "are having a bit of an issue with the spread." But he added that the original syndication in the summer was multiple times oversubscribed and when third quarter results were reported they were better than expected. When Citi came calling with a better rate, the company could not refuse.
Citi approached the San Diego-based developer of intravenous medications with the idea for a repricing of the $235 million "B" loan in the course of normal market updates that the company has with the bank, said Bopp. The debt was incurred over the summer as part of a recapitalization. UBS is also a lead on the deal which is seeing pricing cut 50 basis points from LIBOR plus 23/ 4%. The deal is still in the documentation phase and will be finalized this week, he noted.
Facing some calls for concessions from investors, Alaris has agreed to a provision that will prevent the company from cutting pricing again within a year. "[Investors] did request call protection. They are in a difficult situation and we felt it was a reasonable request," said Bopp. "The protection is that we will not come back to them for a one-year period for any request for an additional repricing." There is no prepayment penalty. Despite buyside murmurs, the company has performed. The operating results and working capital have been better than expected, Bopp noted. Alaris ended up getting better interest rates than it thought, further improving results. "The public refinancing was done at 71/ 4% when our model said 73/ 4%," he added.
Though some investors are pointing fingers at Citi for being aggressive with the repricings, Bopp discounted claims that what the bank is doing is unique. "After the conversation with Citi, I spoke to another banker," said Bopp, noting that he was going to propose the same thing. He declined further comment on the wisdom of pursuing the repricings from Citi's perspective. "I take my advice from the bankers," he concluded.