A challenging pro rata market for big, well-received deals with blown out "B" term loans has forced lenders and companies to re-think strategies. Bankers said Deutsche Bank has done both on recent deals.
The market watched closely as Deutsche Bank recruited small agriculture banks such as Farm Credit of Witchita, Farm Credit of Omaha, and AgFirst Farm Credit Bank to fill out the $230 million pro rata piece of Flowers, replacing typical middle -tier players. Barry Dunn, principal at GCTR Golder Rauner, explained that there was a lot of discussion with the Bank when it led the credit backing his company's acquisition of Transaction Network Services. Officials at Deutsche Bank did not return calls by press time.
Dunn explained that his company kept shaving down the pro rata piece of its deal prior to launch to avoid flex issues and to fit what the bank and company anticipated to be weak investor demand. "I would have liked to have put more into the pro rata but we wanted to get the deal underwritten and I didn't want to get into a flex area," he said. Transaction was structured with a skinny $50 million combined revolver and term "A" compared to its $100 million term "B." But Dunn believes the decision to keep the "A" small made completion of the deal possible within two weeks.