Deutsche Bank and Credit Suisse First Boston's $1.25 billion deal for PanAmSat is on the cusp of filling up and allocations are expected this week after a strong bond offering kick started the syndication. One banker noted half the deal was spoken for before the bond offering, but the pricing of the bonds provided a pointer to the relative value in the bank debt and a subordinated cushion, enabling cautious buysiders to commit. Some investors were waiting to see what would happen with the bonds before committing, said the banker.
The $500 million bond offering, upsized to $800 million, carried a 81/ 2% coupon --about 31/ 2% over 10-year Treasuries. The swap spread is 70 basis points, which means on a floating equivalent basis, the spread is about LIBOR plus 23/ 4%. Meanwhile, the senior bank debt in the form of the $700 million term loan "B" was flexed 1/2% to LIBOR plus 31/ 2% during syndication, to overcome a relatively cautious buyside. "Everybody will tell you investors are hungry, but this is a very selective market. This deal is being completed through a price adjustment, when it should have been a blow out," said one banker.