CIBC World Markets is using the supply/demand imbalance in the market to its advantage by shopping two deals together --Boyd Gaming, an attractive refinance credit, and the less attractive, Borgata Casino deal. "We'll give you special consideration if you take both," a buysider said, describing the pitch by the firm to package the Borgata deal with the Boyd deal. The strategy to help finance the Borgata credit, an Atlantic City-based construction finance deal, is designed to assuage concerns about project finance loans. "Borgata's a much riskier credit and even if the project comes in on budget, it doesn't mean it will come in on time," said a portfolio manager who still hasn't decided whether or not Boyd's worth the Borgata risk. The buysider said commitments are due at the end of the month, following launch of both institutional pieces two weeks ago. Officials at CIBC declined to comment.
The move by CIBC to "soft-link" these deals, as a banker at a competing firm described it, is reflective of a market where there is more investor money chasing deals than supply of new issue. In this case, the borrower also wins as Boyd is backing the construction of the Borgata casino along with MGM Mirage. "This is good for their client," said a banker, pointing out that in this market why shouldn't Boyd use it's more attractive credit to lure investors into it's riskier credit. Calls to officials at the company were not returned by press time. A banker familiar with the deal said some big accounts that have a previous relationship with the company have taken the pitch, but no commitments could be confirmed. Other big investors remain undecided. Buysiders said the firm first launched the $400 million pro rata part of the Boyd deal and offered existing lenders a piece of the "B" without the Borgata tie-in, but for new accounts Borgata's currently part of the pitch.
"They have priced in the risk [on Borgata] but under normal circumstances I wouldn't even consider this deal," said a buysider on the fence. The Boyd institutional tranche is a $100 million term loan "B" priced at LIBOR plus 21/ 2% and the Borgata credit is a $187.5 million "B" term loan priced at LIBOR plus 4%.