Del Monte Foods and its lead banks scrapped their mark-to-market refinancing plans last week, backing down to the investor uproar over plans to evade paying the call protection premiums attached to the deal (LMW, 8/11). Leads Bank of America and Morgan Stanley were fashioning the amended deal so that Del Monte would not have to pay the 102 call premium included in the first year of the deal. "We are not going to pursue a refinancing at this time," a company spokeswoman confirmed, declining to comment on the situation further. B of A and Morgan Stanley were also planning to shop the $1.245 billion credit's $750 million "B" loan in the LIBOR plus 21/2-23/4% range down from the original pricing of LIBOR plus 33/4%. One market player, not involved in the refinancing talks, did feel that the company's deal warranted a lower coupon. But the call protection should have been honored, he said. B of A and Morgan Stanley bankers did not return calls.
Investor pushbacks in response to the loan market's wave of refinancings have been on the rise over the past few weeks. Investors have put their feet down over how far deals can go in terms of tightening pricing and loosening up structure. Deals scapped along with Del Monte include refinancings for Insight Communications and Commonwealth Brands. This is while investors have pushed pricing reductions down to smaller levels as well. Fresenius Medical Care was said to only be reducing its $465 million "B" loan by 25 basis points rather than 50 basis points, while Rite Aid has also succumbed to investor pushbacks.
J.P. Morgan co-arranged the original deal with B of A and the Del Monte spokeswoman said the lender is still co-leading the credit. She did not comment on Morgan Stanley's move to lead a refinancing deal or to take the place of J.P. Morgan. A J.P. Morgan spokesman confirmed that the firm is still involved in the existing credit.