Bank of America and Credit Suisse First Boston's credit for dialysis provider, DaVita, was shown last week to a buyside eager to jump in on the huge $800 million "B" piece. "They're bumping up the leverage, but they generate so much cash flow and they plan to continue to pay down debt," said one buysider who is looking to invest in the seven-year term loan "B" at pricing of LIBOR plus 3 1/4 %. Rich Whitney, cfo at DaVita, is optimistic that interest in the name will generate enough orders to potentially result in a reverse flex on the deal. "There's a good chance they'll be a flex down," he said, regarding positive buzz on the credit.
As eager as investors may be though, they are not ready for a slash on pricing. "This is not a $200 million deal with a billion in orders. People will hold out like on Express Scripts," said one buysider. Upon CSFB and Citi trying to cut pricing on the pharmacy benefit management company's deal to LIBOR plus 13/ 4% from LIBOR plus 21/ 4%, buysiders walked away and the price settled at LIBOR plus 2% (LMW, 3/18). Whitney conceded that the deal size may be too big to push through a big price change. "Someone even said, 'What are trying to do? Suck up all the capacity?'" laughed Whitney.
Even though the company is expected to use the proceeds for a $500-600 million stock repurchase, the company has high, predictable cash flow, a strategy whereby it pays down debt actively, and a strong management team.