Banks last week gave in to some concessions investors demanded on the massive $8 billion debtor-in-possession loan for LyondellBasell, but the leads held fast on others.
Highland Capital Management and Silver Point Capital were among investors that pushed back against the original structure that would not have rolled lenders into the DIP on a pro-rata basis. Banks gave into this demand late Thursday, but held strong on their initial requirement investors put up capital for a new-money DIP before being allowed to participate in the rollup DIP.
"Essentially it's pay to play. It doesn't make everyone happy, but the outcome wasn't terrible. I haven't seen a huge uproar, but maybe everyone's just trying to make heads or tails of it," said one investor. "You get the major one: [parent company Access Industries] doesn't get to play. And investors get offered the super senior secured position -- if you pay." The bankruptcy court will rule on the DIP on Feb. 4, and objections must be filed by Jan. 27.
The DIP includes a $3.25 billion new-money tranche, a $3.25 billion rollup term loan and a $1.515 billion asset-based loan, which would replace the company's existing ABL. All tranches are priced at LIBOR plus 10%. The DIP leads are Citigroup, Goldman Sachs, UBS, ABN-AMRO and Merrill Lynch, according to court documents.
"The grounds [for the pushback] were that the rollup was not going to be allocated pro rata and that it was favoring the arrangers," said an investor. The revised DIP order was amended to include a pro-rata allocation. The existing term loan is $12 billion, and $6.5 billion is held by the underwriting group; $5.5 billion is held by institutional investors. These portions will be reduced pro ratably, syndicating $1.234 to the institutional lenders, which would give each investor a 22.4% share of their existing commitment in the new-money term loan.
In order to participate in the $3.25 billion rollup, investors are required to commit capital to the $3.25 billion new-money tranche. Investors that put up the cash for the new loan will be able to participate in the rollup, and their position in the pre-petition term loan would be eliminated. "If you've got the dough, you definitely want to [roll into the secured DIP]. If you don't have the capital, you're screwed," one banker said. Left in the pre-petition debt, investors will no longer have a first-lien position in the capital structure.
The roll-up portion of the DIP was trading at 65-75 and the new-money DIP was trading at 96-98 Thursday. Both were trading on a when-issued basis. The first-lien term loan was trading at 42-45; the second-lien was trading at 31-36.
A U.S. bankruptcy court approved a $2 billion interim term loan provided by institutional investors last Thursday, and ruled that Lyondell's parent company, Access, which was initially set to commit $750 million to the DIP, was not able to participate. "The court determined that they shouldn't participate based on them being the equity holder for Lyondell," the investor said. "As of right now, they can't participate unless there aren't first-lien lenders to step in." Calls to a portfolio manager at Highland, a spokesman at Silverpoint and a spokeswoman at Lyondell's law firm Cadwalader, Wickersham & Taft were not returned. Calls to bankers at the leads were also not returned
