Goldman Sachs last week had gained $200 million in commitments for Verizon Wireless of the East's $350 million "B" loan, as investors weigh the rich spread against the addition of further telecom exposure. "Most investors are full of telecom or are hurting from losses," a banker familiar with the deal said. "This might be telecom, but it is also single-A paper and is highly attractive to CLOs."
Positives for the credit include adequate asset coverage and assets that generate decent free cash flow. "Certainly the market in telecoms has backed up, but after Verizon posted results over subscriber growth this week, the equity and bonds stabilized on the news," the banker said. Pricing on the five-year bullet loan, rated A+/Baa1 by the agencies, is LIBOR plus 41/ 4% to 43/ 4%, far above the average double-B spread available to the structured vehicles.
The loan backs Verizon Wireless' $1.7 billion acquisition of Price Communications' cellular business (LMW, 7/29). The partnership chose to tap the institutional market to broaden the pool of investors, while the loan provides Verizon with more flexibility than a five-year bond, said the banker.