BMO Nesbitt Burns, SunTrust Bank and Scotia Capital are eyeing a mid January return for the "B" term loan for Canadian door manufacturer Premdor with a reduced "B". The pro rata portion of the deal was oversubscribed, said Surjit Rajpal, executive managing director with BMO, but the "B" did not fly with investors post Sept. 11. "There was expectation there would be changes," Rajpal said, but lead arranger BMO decided to put the credit on ice until conditions in the loan market improved, rather than use the techniques available to make the deal more saleable, as seen on CommScope and Appleton Papers.
The divestiture of the Towanda doorskin manufacturing plant by Premdor, mandated by the Canadian Department of Justice to ensure competition in the sector, means leverage will be less, so risk is reduced rather than exacerbated by the wait and see-approach, Rajpal explained. The stock is also riding on a 52-week high right now, he added.
The pro rata was oversubscribed by $35 million, and has been raised to $235 million from $200 million, while the "B" is now down to $350 million. After what had happened to telecoms, the credit, which backs the acquisition of International Paper from Masonite, was initially cited as a smooth story, defensive in nature, with tangible assets and a diversified customer base, said a banker. Initially it was believed the credit would be flexed down. However bad timing and a reluctance to throw in bells and whistles for a credit with a BB/Ba2 rating, meant investors did not bite, he added. Some investors cited the cycle, while another buysider noted the 3 1/2% over LIBOR pricing on the "B" was not adequate as the "Masonite acquisition did not get us too excited." Rajpal denied the company or other banks limited a price flex. Pricing has yet to be reset.