Lead banks Morgan Stanley and Bank of America have increased pricing and added call protection to the "B' tranche of their $500 million bank deal for PacifiCare Health Systems in an effort to jump-start a slow syndication. Pricing on the $350 million "B" tranche has been flexed up 1/2% from 3 3/4 % to 4 1/4 % over LIBOR. Call protection is set at 103, 102 and 101 over the first three years of the seven-year loan. Officials at PacifiCare and bankers at Morgan Stanley and B of A did not return calls.
The deal hit the market last month to an audience that was hot for health care credits but leery of deals coming out of the HMO sector. More specifically, investors said they were worried about PacifiCare's large costs associated with its senior citizens-focused business. This was a contributing factor to the banks' decision to meet individually with investors (LMW, 6/25).
Morgan Stanley and B of A are offering up-front fees of 3/8% for commitments of $15 million. The deal's $150 million revolver is priced at LIBOR plus 3 1/4 % and was unchanged at press time last week. UBS Warburg and Lehman Brothers are co-syndication agents. Bank of New York, BNP Paribas, and Wells Fargo Bank have landed managing agent roles. It could not be determined how many commitments were in as of last week. PacifiCare is also issuing $500 million of senior notes due 2011. The $1 billion proceeds will be used to refinance existing debt. Officials at the banks either declined to comment or did not return calls.