Joint leads UBS Warburg and BNP Paribas have decided to approach the ratings agencies with their $160 million credit for Hartz Mountain after another lukewarm reception from relationship banks, according to officials familiar with the deal. General syndication has been postponed until early February. "It's something we're considering," said one banker on the deal, declining further comment. Another official close to the matter said, "The ratings will determine the new pricing. The BBs might be a bit ambitious, but they're hoping. They'd be happy with BB-," said one banker close to the credit. He declined further comment. Officials at BNP, UBS and J.W. Childs did not return calls seeking comment.
The loan backs J.W. Childs Associates' leveraged buyout of Hartz (LMW, 11/20). The original deal floundered in the market amid complaints of loose earnings before interest, taxation, depreciation and amortization (EBITDA) calculations, high leverage and an expensive purchase price. Lenders following the deal said a handful of relationship banks were approached late December to come in early on the reworked deal, with only Comerica Bank committing $15 million to the deal. One official explained other banks mulling larger tickets bowed out because they did not like the leverage. Total and senior leverage currently sit at 2.3 times and 3.7 times, respectively, but the official emphasized the interested big-ticket holders saw the original total and senior leverage numbers of 3.2 and 4.6 times. "[The new numbers] did not get out there," said the official, declining to further comment. A Comerica official did not return calls. The pro rata and "B" tranche were previously 3 1/2 % and 4% over LIBOR, respectively.
J.W. Childs anointed UBS as co-lead and co-book manager late last December, bumping BNP after the bank reworked the original $200 million credit. "It was a tough negotiation. The deal did not get done with the original structure," said one banker familiar with the matter. Total and senior leverage were reduced to current levels after the purchase price was reduced, BNP trimmed the credit down to $160 million and increased non-cash pay seller notes. The bank originally expected senior and total leverage at closing of 3.2 and 4.6 times, respectively, with EBITDA of $52 million. Interested lenders balked and estimated EBITDA close to $46 million, with total leverage between 5-5.5 times, and senior at 3.5 times.