About $50 million of Owens-Illinois' revolver moved from dealers to institutions at 97 1/8-97 3/8 up from the 96 1/2-97 1/2 range over the last week on speculation that the company will carve out roughly $500 million of its revolver for a term loan to make the paper more attractive to institutional buyers. This change is expected to come through as an amendment or restatement rather than a refinance and it is expected to occur this month, after the company's first quarter. The move is designed to redistribute exposure to the company by moving paper out of the hands of pro rata lenders and into those of hungry institutional investors without syndicating a restructured deal. The banks holding a lot of the paper are encouraging this move to make the name more liquid in the secondary market.
The company currently has a $3 billion revolver with $2.5 billion outstanding and a $62.5 million term loan, one dealer explained. To carve out the revolver, the company will give the banks and institutions holding the revolver the option to term out 16.7% of their paper for a total of $500 million, the undrawn amount on the revolver. That piece will be combined with the existing $62.5 million for a $562.5 million term loan with similar pricing.
Two months ago, Owens-Illinois' term loan jumped up to 99 5/8 to par as the market responded to rumors of an upsized bond deal expected to pay down at least two-thirds of its term loan (LMW, 1/21). The company later closed the sale of $1 billion of 8 7/8% senior notes maturing in February 2009 and the proceeds from these notes were used to reduce the amount of the term loan. A treasury official at the company declined to comment on the carve-out rumor noting the privacy of its bank debt