Goldman Sachs & Co., CS First Boston, and Citicorp have increased their blockbuster loan for Allied Waste Industries by $50 million to $1.275 billion.
The deal backing the acquisition of the trash handling business of Laidlaw Inc. was handsomely oversubscribed by last Friday, bringing in more than 30 commitments.
Sources close to the deal said the banks would have little trouble recommitting to the deal after the minimal increase in deal size.
The loan marks the largest to date for Goldman Sach's lending operation, which has only been leading deals for the past two years. Goldman won a range of financing positions for Allied's acquisition, including leading a well-received bond issue and serving as adviser.
Bankers generally didn't see a difference between the Goldman-led deal and those arranged by commercial banks.
"The bankers at Goldman speak the same language and do the same things," said a banker who participated in the deal.
"It's a well-structured, well-priced deal," said another banker who committed to the transaction. "Management presents well, and the sponsors are strong. When you couple that with the fact that there is little in the market of its quality, that explains its warm and rapid acceptance into the bank loan market."
Bankers said that the waste management business itself has "come of age" in the last couple of years. For instance, Bank of Boston Corp. led a well- received transaction for USA Waste earlier this year.
"A lot of banks are more aware of the industry and knowledgeable about how the business works," said a loan syndicator who did not participate in the Allied Waste deal.
The lead banks on the Allied Waste loan had closed the $40 million and $25 million tiers prior to closing syndication, but were still accepting $15 million commitments.
Some commercial bankers questioned whether the fees offered to the $40 million co-agents might have been too high.
"Did they need to pay up at the co-agent level? Why not just go straight to the retail?" said a lending officer.
Others, however, said that the attractive coagency fees helped get the deal off the ground.
"If anything, Goldman Sachs understands momentum," said a banker who contributed to the deal. "The deal had strong momentum after that first tier closed, and that's what the borrower paid to generate."
The lender said that J.P. Morgan & Co. and Merrill Lynch & Co. are similarly providing attractive fees to banks that commit to Norfolk Southern's $12.5 billion loan in its hostile bid for Conrail.
"If you look at Allied Waste and Norfolk Southern, in both cases, you had a situation where a company needed to raise money and was willing to offer up-front fees to get it," said a commercial lender. "Based on what the companies look like after the deals closed, those fees are above the market, which attracts a lot of attention."
