J.P. Morgan last week launched syndication of a $325 million credit for Revlon Consumer Products, the latest deal to hit the market with a rate floor to protect against falling interest rates. The institution of rate-floors on "B" term loans, intended as a short-term step, could be a longer-term and increasingly trendier measure as the Federal Reserve lowered its key federal funds rate for overnight bank loans for the 10th time this year to 2% last week. The average return on "B" term loans is now half the 10% of last year, wailed a banker, also bemoaning the accompanying high default rates.
The Revlon credit, split between a $200 million revolver and a $125 million term loan, is a refinancing that accompanies a $250 million in notes offering. A J.P. Morgan spokesman confirmed the bank is leading the credit but declined comment on the rate floor and pricing. A Revlon spokeswoman was unable to respond to questions by press time. Bear Stearns has a 21/ 2% rate floor on its deal for Appleton Papers while J.P. Morgan has a floor on its Advance Auto credit joined by the floor on Lehman Brothers' innovative Tesoro Petroleum credit (LMW, 10/15). The three deals, besides Revlon, are now subscribed said bankers.