The $130 million credit facility backing Code Hennessy & Simmons' $275 million buyout of Otis Spunkmeyer is being allocated today. Approximately 20 accounts are said to have subscribed to the "B" term loan, which will close and fund later this week. Merrill Lynch and J.P. Morgan offered the 6.5-year "B" piece at 98 and reduced the size of the loan by $10 million to $110 million. Code Hennessy threw in additional equity to cover the reduction. Officials at Merrill declined to comment.
The deal was ultimately oversubscribed, but it was hit by worsening market conditions that caused a number of other deals to be pulled. In addition, buysiders were concerned about the high leverage following the buyout. To compensate, pricing on the "B" term loan was flexed upward from LIBOR plus 31/ 2% to LIBOR plus 41/ 4%, while the $20 million revolver increased from LIBOR plus 3% to LIBOR plus 33/ 4%.