Flowers Foods is looking for a flex down in pricing on the company's $150 million "B" tranche, but institutional buyers said they would have to reconsider their commitments to the credit if the company succeeds in getting lead arranger Deutsche Bank to make the move. The $380 million credit launched two weeks ago and was reportedly three times oversubscribed in one day. The bank's easy sell to a market hungry for food credits--especially well priced BBB-/Ba2s--caught the attention of James Woodward, cfo at Flowers. "We are asking them to reduce pricing," said Woodward, declining to comment on Deutsche's response or to elaborate more fully regarding possible structural changes to the deal. He explained that such a frenzy for the deal may mean shaving off 25 basis points may not reduce fervor among investors.
One buysider noted he would be interested in Flowers, but not as interested, if pricing reduces 25 or 50 basis points as expected. Investors, speculating that a cut may be coming, suggested that an opportunity for the same yield may exist at a lower risk level. "Spreads are about the same on the Michael Foods deal and you can get that one at [LIBOR plus] 3%," noted one buysider.
Bankers said Deutsche Bank is looking at a flex down, but it is still figuring out how much of a market exists at a lower price and whether a dip into the "B" will be needed if syndication of the $230 million pro rata deck does not go as smoothly as planned. Officials at Deutsche did not return calls by press time.