An amendment requiring a 51% vote was approved last week by investors on the Appleton Papers deal, giving Bear Stearns permission to create a "C" tranche on the debt. But buysiders said completely filling the tranche should prove challenging as existing investors in the senior part of the deal are especially unhappy with the company's plans to draw down on the bank debt to pay down $50 million of outstanding senior subordinated notes.
"They're not paying down senior debt as quickly, but total leverage will be the same," said a banker close to the deal, adding that lead arranger, Bear Stearns, received consent for the amendment last Thursday and was expecting commitments on the new tranche to be flooding in from either existing or new investors. The roughly $115 million "C" tranche will be priced 100 basis points cheaper than the existing "B" tranche which is priced at LIBOR plus 41/ 4%.
A buysider predicted that Bear Stearns would fill some of the "C" tranche with investors who are also in the bonds, but get stuck with certain key bank loan investors holding on to the "B" paper. Dale Parker, cfo, did not return calls by press time.