Bank of America, J.P. Morgan, UBS Warburg and Morgan Stanley are taking a wait-and-see approach to pricing on Del Monte Foods' $1.6 billion bank deal, which is scheduled to be launched on Sept. 6. Pricing initially was expected to be LIBOR plus 21/ 2% and LIBOR plus 23/ 4% for the pro-rata and "B" piece, respectively, but this is now on ice as market conditions are evaluated, one banker said. Pricing is likely to rise to 23/ 4-3% over LIBOR to reflect the tougher market, he noted. UBS bankers declined to comment, and officials at the other three banks did not return calls.
The loan has been widely anticipated by investors, who desire paper from the food sector and appreciate the earnings visibility of the issuer, one buysider said. But pricing has risen, with no double-B credits in syndication priced below LIBOR plus 3%, a banker noted. This is in stark contrast to most of the summer, when LIBOR plus 21/ 2% was the norm. Additionally, there is a busy pipeline from September onwards--with a number of deals, including the mammoth Burger King loan, coming to market--and gauging demand from investors relative to supply is a challenge, he explained.
Del Monte's senior secured credit facility backs the merger of certain businesses of H.J. Heinz into a new Del Monte subsidiary (LMW, 7/15). The credit, which also refinances existing debt, is comprised of an eight-year, $900 million "B" piece, a six-year, $450 million revolver and a six-year, $250 million "A" term loan.