A new loan for Bridge Information Systems shows how lead lenders are turning syndication on its head to cater to institutional investors.
The $800 million deal, led by Goldman, Sachs & Co., hit the market in late May. The investment bank first solicited institutional investors, then structured and priced the loan to fit their demands, rather than holding a meeting with bankers first.
This is not the first deal where banks were initially shunned, but the shift did surprise some bankers who participated. One said the deal's unusual execution shows how institutional investors are shaping a market that was once the province of banks.
"That's the significant part of this," the banker said. Goldman "lined up three institutional investors, structured the loan, and then went the traditional route."
Goldman, which acted as arranger and syndication agent on the loan, could not be reached for comment.
Part of the incentive for Goldman to sample the institutional investor market on the deal was the loan's high risk. Institutional investors-who now account for nearly 40% of the syndicated loan market-invest primarily in leveraged, or high-yield, loans.
Scott Page and Payson Swaffield, co-managers of the $2 billion Eaton Vance Prime Rate Fund since 1996, and participants in the Bridge deal, said managers have a noticeably greater impact in the way deals are shaped these days. "It's common sense that they (syndicators) would try to find out what we like or don't like," Mr. Page said.
The Bridge loan includes a $200 million revolving credit priced at 2.75% over the London interbank offered rate, a $100 million term loan at Libor plus 2.75% due in 2003, and a seven-year $500 million term loan priced at Libor plus 3%. All of those prices indicate that the loan is highly leveraged, according to Securities Data Co.
The loan is being used by New York-based Bridge to finance its $510 million buyout of Dow Jones Markets Inc., a financial news and data distribution network, from Dow Jones & Co.
Bank of Montreal is administration agent, and Bank of Nova Scotia is documentation agent.