FLY Leasing set off a number of worries in the market this week after it withdrew its proposed term loan re-pricing citing “market conditions” as the reason. The lead arranger on the deal was Citigroup, which earlier this month was looking at a price range of L+350-375bps, with a 1.25% LIBOR floor and a par offer price. The issuer also offered to refresh the 101 soft call premium for one year. Existing lenders would have been repaid at 101. This was moved from the December range of L+450bps, with a 1.25% LIBOR floor.
FLY placed the $395 million B term loan (which was arranged by Citigroup, BNP Paribas, Deutsche Bank, Morgan Stanley, RBC Capital Markets, and Jefferies) to refinance existing debt. The deal captured a 1 recovery rating from S&P with BB/B2 corporate and BBB-/B1 facility ratings.
The markets are seeing pushback from investors and this about-turn by FLY is a signal that moves to lower the interest rates on debt are going well beyond what investors consider palatable. FLY is just one of an increasing number of companies to pull loan repricings. In January across market sectors there were five such pulls including DuPont Performance Coatings (now part of the Carlyle Group), which cancelled a repricing of a $2.3bn loan following pushback from investors. In February there were another three such cancellations across all sectors that we can find right now, which makes it highly likely there are far more.
This news marks a line in the sand – strong the markets might be but there are limits and investors in 2013 are ensuring, where they can, that their expectations are not sliced. Is this an indication that the markets may be running out of steam? Looking at some of the recent issuances in our sector – GECAS ABS is just one example – it doesn’t seem so right now but these events require further investigation to assess what could be decreasing interest. Watch this space – closely.
FLY Leasing pulls term loan re-pricing
