Strong investor demand for a junk-bond offering by the textile concern WestPoint Stevens Inc. will result in a sharp cutback in the size of a recently underwritten bank deal for the company.
The $750 million package of bank loans, led by the banking units of Bankers Trust New York Corp. and NationsBank Corp., will be reduced by $400 million, said a spokesman for the Georgia-based company, which is to succeed West Point-Pepperell.
The junk-bond market has siphoned business from the loan market all year, with issuers taking advantage of investors' insatiable appetite for high-yielding securities.
$950 Million of Senior Notes
On Wednesday, WestPoint sold $950 million of senior notes and debentures, far more than the $600 million initially contemplated.
An investment banker involved in the offering said it was the largest deal ever done in the junk-bond market by a new issuer.
The two-part offering consisted of $400 million of 8 3/4% senior notes, and $550 million of 9 3/8% senior subordinated debentures, both priced at par.
Donaldson, Lufkin & Jenrette Securities Corp. was lead manager of the offering.
Proceeds to Refinance Debt
Among the co-managers were the securities underwriting subsidiaries of Bankers Trust and J.P. Morgan & Co.
Proceeds from the new bank loans and securities offering will be used mainly to refinance more than $1 billion of existing bank debt, much of it stemming from the failed 1989 buyout of West Point-Pepperell by the Chicago industrialist William Farley.
WestPoint Stevens is the name given to a new entity that is being formed by the merger of West Point-Pepperell and Valley Fashions Corp.
Valley is the company which emerged from bankruptcy proceedings last year as the successor to Mr. Farley's acquisition vehicle, West Point Acquisition Corp.
Valley owns 95% of the stock in West Point-Pepperell, the Georgia-based maker of bed sheets and bath towels.
Valley said in September that it plans to buy the remaining 5% of West Point-Pepperell.
The merger of Valley and West Point into WestPoint Stevens is scheduled to be completed on Dec. 10.
WestPoint's bank deal originally consisted of four components, including two tranches of term loans totaling $400 million.
Loans No Longer Needed
Given the outcome of the securities offering, the term loans are no longer needed, the WestPoint spokesman said Wednesday.
That leaves a $200 million revolver, and a $150 million receivables facility.
The bank deal will close when the merger is completed.
In addition to Bankers Trust and NationsBank, other lenders in the bank group are said to include Bank of Boston, Bank of New York, Bank of Nova Scotia, and First National Bank of Chicago.WestPoint'sBank Refinancing AmountType (millions) "A" term loan(*) $200Revolver 200"B" term loan(*) 200Receivables facility 150 (*) Replaced by excess proceeds fromnote offering