Salomon Smith Barney and Lehman Brothers last week snatched lead arranger roles on a $950 million add-on deal for Tulsa, Okla.-based Williams Communications, topping existing leadsBank of America and J.P. Morgan Chase. Some market sources said SSB and Lehman edged the two commercial banks with the promise of better underwriting execution on future securities deals. Others, however, say they won it the old fashioned way: they pitched cheap pricing.
Price talk on the credit is between LIBOR plus 31/4 % and 31/2 %. Bankers last week said that could be a challenge given a recent influx of telecom paper in the market and higher pricing on some of those deals. "Level 3 [Communications ] priced at LIBOR plus 4% and it's considered a stronger company," said one banker. Indeed, there was some speculation that the agents may need to flex up pricing before syndication of the credit is launched this week. An increase would probably not sit well with the company, bankers noted. Officials at Williams did not return calls.
Bankers speculated that B of A and Chase may have been concerned about selling the pro rata part of the deal at a discount to other competing telecom credits. An influx of telecom add-on deals seem to be hitting the market: Level 3, FairPoint Communications, Nextel Partners, and now Williams, in response to what bankers describe as intense institutional appetite for strong credits. "There's a good chance for good execution if you have a big deal. There's not a lot of institutional volume and there's a lot sitting on institutional balance sheets," said one banker explaining that the institutional tranche of Williams should have no problem.
As reported last week on LMW's Web site, SSB and Lehman won the mandate for the add-on to an existing $1.05 billion credit that comprises a $550 million, five-year revolver priced at LIBOR plus 21/4 % and a $500 million, four-year term loan priced at LIBOR plus 21/4 %. A banker working on the deal confirmed SSB and Lehman had landed the add-on.