Bankers at CIBC Wood Gundy Securities Corp. are continuing to ink deals in the publishing industry.
The bank is co-leading with First Union Corp. the financing for Thomas H. Lee Co.'s $300 million recapitalization of Transwestern Publishing Co. LP, a San Diego-based publisher of telephone directories.
The New York-based unit of CIBC, an investor in buyout firm Thomas H. Lee's $1.4 billion fund and a lender to Transwestern, brought the transaction idea to Boston-based Thomas H. Lee. The transaction is expected to close Wednesday.
The commitment, which is two-thirds underwritten by CIBC and one-third by First Union, includes a $115 million bank loan and a $75 million bridge loan. The bridge loan will finance the company until it goes to the high- yield market to raise $100 million through a 144a offering, expected in early November.
The proceeds of that high-yield offering will take out the $75 million bridge, and the remaining $25 million will be used to take down the bank debt.
If Thomas H. Lee is unable to sell the high-yield bonds, the banks have committed to buy them at a capped interest rate.
"The attractive quality about this was that it gives us both a bridge and the knowledge that we have takeout financing," said Scott Schoen, a managing director at Thomas H. Lee.
The investment is being made from the Thomas H. Lee Equity Fund III, which closed in 1995. CIBC is an investor in the fund, so it will be committing its own equity along with Thomas H. Lee and Continental Illinois Venture Corp., a subsidiary of BankAmerica Corp. and Transwestern's largest shareholder.
CIBC and First Union made a loan that financed Continental Illinois' management buyout of Transwestern in 1993. The lenders knew of the owner's intentions to auction the company early next year and brought Thomas H. Lee the opportunity to approach Transwestern earlier, Mr. Schoen said.
"Clearly, what distinguished them was that they brought us the opportunity to look at the transaction with them," Mr. Schoen added.
"Being able to arrange all of the financing with parties that are related makes it very powerful and enables us to substantially shorten the time of due diligence and arranging the financing."
Some of CIBC's bankers have had relationships with Thomas H. Lee that date back to their days at Argosy Group and Drexel Burnham Lambert.
Dean Kehler, managing director and co-head of high-yield at CIBC Wood Gundy Securities, said that the deal illustrates the firm's effort to take "one-stop shopping one step further" by integrating the advisory role with the bank's ability to provide financing.
"We knew their objectives and were able to put (the deal) together before it got to the broad market in an auction," Mr. Kehler said.
