A yo-yo round of pricing changes on the $350 million Express Scripts term loan "B" had investors running to then from the deal before pricing finally settled at LIBOR plus 2% last week. A rousing initial response had agentsCredit Suisse First Boston and Citibank looking to cut pricing for the company from LIBOR plus 21/ 4% down to 13/ 4%. But they went too low and investors began to walk. "Obviously at LIBOR plus 21/ 4% it was very well oversubscribed and in our discussions with Citi and CSFB we determined that the market might have enough appetite at LIBOR plus 13/ 4%," noted Darryl Weinrich, v.p. and treasurer of Express Scripts. "But, we could not get enough in at this price so went back to 2%."
The pricing is considered very tight for a BB+/Ba1 credit, and one noted that the average spreads in the market are closer to 31/ 8% over LIBOR for this rating. "From what I hear, the institutional market is looking for good quality loans, and it sounds like there is not a lot out there," Weinrich said. "National Express has good cash-flow generation, and we have already demonstrated to the market an ability to delever," he added. The credit is now trading at par plus 1/2, a banker said, suggesting the level found was the right one.
One buysider who was interested in the credit at the first showing, said even at LIBOR plus 2% the credit does not offer a generous enough spread, hence the investor walked. But the huge ramping-up of assets going on in the market right now from CLOs, and the sheer lack of available quality paper was enough to fill demand, the investor added. The credit backs Express' acquisition of New Jersey-based National Prescription Administration (NPA).
Weinrich, meanwhile, said he was extremely pleased with the job his lead banks did on the deal. He said Express chose the banks based on relationships. "CSFB is the current administrative agent and advised on the NPA transaction. We then put it out to bid for the second spot and Citi is one of our strong relationship banks," he said.