Williams Communications, holding an underwriting commitment from Salomon Smith Barney and Lehman Brothers, may increase the term "A" piece of its credit after the $300 million, six-year term loan "B" credit was pulled from the market. As first reported on LMW's Web site last week, the "B" tranche was pulled after stalling despite tweaks to revive it. A banker close to the deal said the company will decide later this month on the size of the potential increase to the "A" tranche, which was fully subscribed early last week. Sources said Salomon and Lehman will go back to the market with the term "B" at a later date when the telecom sector improves. But ultimately, it's the company's call. A Williams official noted that, even though the credit is not fully funded, the firms did sign a letter of commitment. The Williams official declined to comment on discussions regarding a hike up on the $450 million pro rata piece.
One banker noted that there is no need to push the "B" in an unfriendly market as proceeds from the company's $1.4 billion bond deal last month and the already $450 million available in bank debt can serve the company's interim financing needs. As buysiders continued to pass on the credit, the market watched the institutional piece of the deal struggle for a month as Salomon and Lehman first downsized the "B" from $500 million to $300 million, increased pricing from 3 3/4 % to 4% over LIBOR, and finally pitched the credit with an original issue discount at 96 3/4.
A buysider noted pricing and structure on the "A" piece created more interest from retail banks than the institutional piece has from buysiders. "Some banks still want to keep a good relationship with Williams," said the buysider, explaining why banks are more likely to bail out the company than institutional lenders. The existing term loan "A" has a five-year maturity and is priced at LIBOR plus 2 1/2%.
The credit had some history before it hit the market. Lehman and Salomon won the deal over existing leads J.P. Morgan Chase and Bank of America, and some market players at the time said the company was looking for investment banks to pave the way for future securities issues. But the other side of the story said aggressive pricing was the reason the mandates went the way they did, and that Chase and B of A weren't willing to do a deal at those levels.