Investors are gobbling up the bank debt backing Del Monte's acquisition of certain businesses from H.J. Heinz, and they're especially fond of a $300 million senior secured floating rate note being syndicated to buysiders. "It looks like a bond, but is priced at LIBOR plus 41/ 4%, has the same collateral package as the bank debt and is noncallable for five years," said one buysider. This is 1/4% higher than the $500 million "B" piece, which had already gained between $200 and $300 million of commitments a day after launching last Thursday, said a banker familiar with the deal. The investor said institutions taking the "B" would also probably be eligible for the note.
Bank of America, J.P. Morgan, UBS Warburg, BMO Nesbitt Burns and Morgan Stanley are leading the debt package, which also includes a $350 million revolver and a $250 million "A" loan. Despite the support for the deal, one buysider did question the creation of a $300 million A-1 tranche that is not being syndicated. "B of A and J.P. Morgan will hold it as a bridge until a future bond offering. The roadshow is planned for December," he said. "I am not crazy with it being there. If you make a bridge then do it with institutions, not with yourselves," he added. He explained there is no guarantee the bond offering will proceed. A J.P. Morgan spokesman said the bridge is very short term. Thomas Gibbons, senior v.p. and treasurer could not be reached by press time.
Still, investors are calling the shots right now. Along with structural enhancements such as call protection, LIBOR floors and upfront fees have led to one of the most investor-friendly environments in the loan market, buysiders said.