Buysiders got their wish for more "B" debt on the DaVita, Inc. deal as Credit Susisse First Boston and Bank of America upsized the $175 million "B" piece to $200 million, downsizing the $175 million revolver to $150 million and the original $75 million term "A" to $50 million. Buysiders had been clamoring for an increase to the "B' tranche (www.loanmarketweek.com , 4/6). But with the change investors in the oversubscribed "B" piece will now only receive LIBOR plus 23/ 4% rather than the original price of LIBOR plus 33/ 4%, as the pricing flexed down. Rich Whitney, cfo, did not return calls.
The buysider noted the credit shouldn't have any problem selling at the new price as it still represents a good relative value to the company's recently issued notes. She explained the company's bonds are currently yielding roughly 9%, so 23/ 4% over LIBOR for a senior secured position on the loan is still a good play. "Bond holders are only getting about 2% more and they're incurring a lot more risk vis-á-vis the loan," she said.
The market said the change came because agents could not move the original $250 million pro rata--now $200 million--part of the deal priced at LIBOR plus 23/ 4%.