Several loan investors were undecided last week whether to stay in Moore Wallace as Citibank moved ahead with a plan to reprice the $500 million "B" loan at LIBOR plus 2%. Moore Wallace's credit was repriced in August from LIBOR plus 3% to LIBOR plus 21/2% and investors are frustrated to see the company and Citi coming back for more so soon. John Laurie, senior v.p. and treasurer of Moore-Wallace, declined to comment on whether the company was approached by Citi or vice versa with the idea. He referred questions to Citi bankers. Michael Mauer, managing director and head of U.S. loan syndicate, and a spokeswoman declined comment. Despite the frustration, the deal is expected to get done.
In addition to being peeved that the repricings are coming so close together, buysiders say they are irritated that there is no performance data available to justify the move. The deadline for commitments is the end of this month--the day before the numbers come out--which does not provide enough time to analyze them, investors complained. "People are [angry] on this and I've not made my mind up whether to stay in," one buysider said. Others have already made up their mind. "We've told them [Citi] we're not a player at 200," one investor said.
One loan banker responded to this complaint by noting that there was a call scheduled last Friday to update the forecast on the private side and later this week there will be a call on the public side. He added that analysts should be able to decide on this since they know the credit.
Even some bailouts are not expected to derail the effort, investors and sell-side officials agreed. "My view as a distribution person is that you can get any repricing done right now," said one loan banker. "People are so desperate for assets. If institutional investors don't want it, then banks will take it." He noted that banks have seen tremendous run-off of their loan portfolios as bonds have repaid bank debt. Another loan investor said that despite the talk of accounts bowing out, investors won't, and he certainly would not. "This deal will get done. I'd like to fight it in principle, but I won't," said one loan pro. "It [stinks]. I don't agree, but if I opt out I need more assets," he added. There is said to be interest from investors who will up their commitments if some bow out, said a source.
The pricing is not the biggest issue. There are credits at the BB level at LIBOR plus 2% that CLOs hold, said one investor in the credit. He also admitted that at LIBOR plus 21/2% the credit was trading at 101, so it does not make the move that surprising. "We're our own worst enemy," said one buysider, noting that the frenzy for the credit is behind much of the repricing. Investors also said that though they are unhappy with Citi, all the banks are doing this.
There have been situations when buysiders have been indignant enough to stop a repricing, such as Commonwealth Brands, said a buysider. But this market is simply too short of paper and issuers are taking advantage. One investor struck a what-goes-around-come-around tone, asking, "What will happen when these issuers need help?" The other lead banks in the credit are Deutsche Bank, Bank One, Morgan Stanley, Scotia Bank and Fleet Bank.