J.P. Morgan is allocating the $100 million add-on for Interstate Bakeries this week. The deal backs the buyback of 7.5 million shares of the company from Tower Holding Company, a subsidiary of Nestlé. The new credit is a term loan "C" and is priced at LIBOR plus 2%, said an investor, expressing dissatisfaction with the lack of an up-front fee and the skinny spread. The food sector is pretty hot, as demonstrated by thin pricing and the mass of demand, he added. National Dairy Holdings (NDH) "B" term loan has been well oversubscribed and is being flexed downwards 1/4% from 2 3/4% over LIBOR, he added. Wachovia Bank leads the $300 million NDH credit.
The $125 million Interstate "B" loan, completed last summer is priced at LIBOR plus 2 1/4%, but has been trading at 101, the buysider noted, pointing out hidden value on the credit. The buysider added that a fund will not venture into a deal if pricing goes below 2% over LIBOR for leveraged loans. Express Scripts tried to push the envelope to LIBOR plus 1 3/4%, he noted, but this was rejected, even for a hot healthcare deal. Frank Coffey, senior v.p. and cfo, of Interstate did not return calls.