Bankers and institutional investors starved for high-yielding leveraged loans will have a new $650 million credit to sink their teeth into late next month.
Toronto-Dominion Bank is set to lead syndication for a loan to Laidlaw Environmental Services backing its stock and cash acquisition of Rollins Environmental Services. The deal is expected to create the largest management firm for industrial and hazardous wastes in North America.
The bank, which was ranked fifth among leveraged lenders last year, has a long-standing relationship with Burlington, Ontario-based Laidlaw Inc., the waste firm's parent, said Brendan J. O'Halloran, a managing director for syndications at the Canadian bank.
"Within the hazardous and industrial waste management industry, this is the most exciting thing to happen for years because it produces the largest, most integrated company out there and puts Laidlaw at the forefront," said Mr. O'Halloran.
The credit has already attracted both U.S. and Canadian banks as managing agents: NationsBank Corp., First Chicago NBD Corp., and Bank of Nova Scotia have signed on and are underwriting most of the loan. A bank meeting has been scheduled for the last week of March, said Mr. O'Halloran.
The market's appetite for yield should prove more than enough to devour both the bank and institutional tranches of the credit. Most of the 40-plus leveraged loans currently in the market have dollar volumes of less than $500 million, according to Loan Pricing Corp./Gold Sheets. Only seven credits are for $650 million or more.
"There is nowhere near enough paper to satisfy the demand of institutional and bank investors for the leveraged loan market," said Bob Marcus, managing director in the corporate finance group of SunTrust Capital Markets Inc. "A lot of people are out there looking for yield, and the leveraged market is where you go."
That includes banks that haven't traditionally sought portions of leveraged credits, such as SunTrust, he said.
The Laidlaw credit, to be used for working capital, capital expenditures, and consideration paid to Laidlaw Inc., is split into a $225 million, six-year amortizing term loan; a $275 million, six-year revolver (of which $200 million will be largely undrawn letters of credit); and two institutional tranches of $75 million, as seven-year and eight-year amortizing term loans.
Initial pricing for the bank portion of the loan is 237.5 basis points above the London interbank offered rate, with 312 basis points and 337 basis points above Libor, respectively, for the seven-year and eight-year tranches. Fees have not yet been set, said Mr. O'Halloran.
Although the complex transaction is structured as a sale of Laidlaw Environmental Services to Rollins, the deal actually places 66.66% of equity in the post-merger company in the hands of Laidlaw Inc., according to waste industry analysts.
