Market appetite for energy credits has pushed up levels for Dresser Equipment's term loan "A" and "B" and dealers said as much as $50 million changed hands last week. The term loan "A" traded at 1001/ 4 and the "B" paper traded at 1001/ 2, as lenders left with skinny allocations cashed out. Dealers explained that when final allocations get so small that it is not worth the administrative work, lenders will sell paper back to the agent at a profit. "Nobody wants $1 million as a credit; it's too much to manage," one trader explained. Dealers taking 1/8 or 1/4 on each trade are generally happy to oblige.
Allocations are small because the credit blew out in syndication, as more than $1.5 billion in commitments came in on the $820 million credit (LMW, 3/25). The credit is popular because it is in a popular sector. "In general, things are very favorable for us because of the under investment in U.S. energy in the last 20 years," a company spokesman said. "We're not surprised it's trading over par."
A market player said the credit has all the right components to give it some juice in the secondary market. "It's seen as a strong BB credit; it's priced right and is in the right sector. Energy is really hot because of the situation in California," he said. "It just pushes all the right buttons right now, so people are willing to pay up for a premium." Another dealer agreed that the California energy crisis is helping the credit's performance. "Anybody who's pumping natural gas is making a ton of money, and anybody who's helping them pump is making a ton more," he said. Dresser, based in Dallas, is an energy equipment provider.
Dresser's credit comprises a $100 million, six-year revolver priced at LIBOR plus 3%, a $445 million eight-year term loan "B" priced at 31/ 2%. Credit Suisse First Boston and Morgan Stanley lead the deal. The pro rata is offered at 99 5/8, but there were reportedly no trades.