Wyndham International's increasing rate loan traded down last week after Moody's Investors Service assigned a Caa1 rating to the company's proposed $750 million of senior notes, causing investors to fret overt the status of the deal. The new notes are slated to pay down all of the IRL and 10-15% of the company's term loan "B" expiring in 2004, and that prospect had driven Wyndham's IRL paper up toward par. But prices fell to 98 last week as approximately $10 million changed hands after Moody's came out with its rating. Rick Smith, cfo of Wyndham, was not in the office Friday morning and could not be reached for comment. A company spokeswoman did not comment by press time.
Most investors said they expect the note offering to get done, with the Caa1 simply translating into steeper expense for the company. But the hiccup last week was enough to prompt a pullback from some investors who look favorably on the new $750 million note offering because it will replace shorter-term paper with the notes scheduled to mature in 2008. That move should mitigate the risk of further refinancing of the bank paper.
Spreads are wide on the "B" paper, which is being offered in the 95 95 1/2 range down from the 97 1/2 98 1/2 range, but no trades could be confirmed. There was speculation among dealers that collateralized loan obligations will have to start selling because of the low rating. But one dealer noted that most vehicles have baskets for the paper at these ratings and will not have to sell out of it.