B of A, BT to Lead $700M Loan for Del Monte Deal

BankAmerica Corp. and Bankers Trust New York Corp. are set to launch a $700 million senior bank loan Thursday to support Texas Pacific Group's acquisition of Del Monte Foods Company of San Francisco.

The two banking companies, along with Bear, Stearns & Co., are also expected to lead a high-yield bond issue for Del Monte, the nation's largest branded canner and distributor of fruits and vegetables.

The senior bank loan, which will also be used to refinance some Del Monte debt, comes to market during a relatively quiet time for leveraged loans. Indeed, the banks hope to use the market malaise to their advantage as they sell off pieces of the fully underwritten loan.

"The bank market will view this favorably because Del Monte is one of the most highly respected names in the food industry and because there is a dearth of leveraged paper in the market," said Mark Lies, a managing director in syndications at BancAmerica Securities Inc., the investment banking arm of BankAmerica Corp.

Texas Pacific, a buyout firm with offices in Fort Worth and San Francisco, said it plans to pay about $800 million for Del Monte, which is currently owned by a buyout group led by Merrill Lynch & Co.

Texas Pacific's lead banks are looking for commitments of $15 million$25 million to participate in the loan, which is secured against the assets of Del Monte.

The deal is divided into a six-year, $350 million revolving credit; a six-year, $200 million term loan, and $50 million each of seven-, eight-, and nine-year pieces.

The pricing on the-six year pieces is the London interbank offered rate plus 225 basis points, rising to 300, 325, and 350 basis points over Libor, respectively, for the three longer-dated portions.

"That deal has lots of juice," said a leveraged lender. "It should be well subscribed."

Lending experts said the longer maturity on the bank debt suggests a company with high leverage. Longer-dated tranches, which are often bought by institutional investors, are typically designed to reduce a company's cash-flow burden.

But Mr. Lies said that Texas Pacific had structured the bank deal to give maximum financial and operating flexibility rather than to alleviate any pressure from leverage. "This deal will be refinanced well before the "A" piece matures," he said.

BankAmerica is a longtime lead lender to Del Monte; Bankers Trust is the canner's trustee.

Arthur Penn, a managing director in charge of fixed-income capital markets at Bankers Trust, said that Texas Pacific is quickly becoming well- known in the buyout business.

"In terms of size, Texas Pacific is equivalent of any of the biggest names," he said.

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