Buysiders, excited about the $2.6 billion Suiza Foods Corp. deal that will offer an estimated $750 million tranche to institutions, are wondering where the bond piece is on the deal hoping one may surface. The company, says they should not hope too hard. The deal is expected to price at LIBOR plus 3% and investors were quick to note that the deal, rated Ba2 by Moody's Investors Service, is plenty attractive as is. However, they added that a bond piece would be key as it would provide some subordinated cushion. "On a deal this size in this market you expect bonds upfront," noted one buysider. "Bonds would provide extra collateral to senior lenders."
Another buysider noted that Suiza would most likely fair well with pricing, as high-yield food bonds have been outperforming overall high-yield indices. Responding, Cory Olson, treasurer, said the company has no intention of issuing bonds. "We like to preserve flexibility in our capital structure," said Olson, explaining that longer maturities on bonds are unattractive as the company continually uses its high cash flow to pay off debt. "Cash flow is strong in this industry so you can retire debt quickly," he added. Olson also noted that there seems to be plenty of interest from the institutional side on the credit without the bond piece, so restructuring at this point is not a consideration. Olson would not disclose the structure of the tranches.
After Moody's issued its rating last week, bankers are expecting pricing at LIBOR plus 2 1/2 % on the pro rata. The bank meeting is expected to take place in three weeks.