Goldman Sachs & Co. is in the market with a $205 million, two-year deal for Granite Broadcasting Corporation, a credit the firm reportedly picked up after the company's incumbent leads backed away. A banker close to the deal said the Goldman took the lead after Deutsche Bank and Bank of New York passed on it because the banks had concerns regarding the broadcast company's debt profile. Goldman Sachs declined to comment. Officials at Deutsche Bank and Bank of New York did not return calls. Officials at Granite Broadcasting did not return calls.
The banker said the Granite deal will be fully funded with institutional money as Moody's Investors Service's downgrades on its debt, coupled with a significant draw down on its existing $260 million revolver sparked fear among commercial bankers. "They're thinking, where's the most liquid, deepest market to place the paper?" he said, explaining why the deal will be institutionally funded. He stopped short of saying the deal--one where commercial banks decline participation and institutional investors fill out the roster--was representative of the tight-money, risk-averse climate in the commercial loan market.
The banker elaborated that the Granite deal is unique in that the company is highly leveraged overall but has compelling asset coverage for its senior secured debt. "Clearly the company has credit issues, but even if it goes down the tubes you'll be covered by asset values," said the banker. Exact pricing could not be determined, but the banker added that heavy spreads on the deal along with the company's strong asset base relative to its senior secured debt likely prompted Goldman to pick up the deal. Bank of New York and Deutsche Bank were lead arrangers on the company's $260 million, seven-year facility signed in June 1998.