J.P. Morgan & Co. is taking an especially careful approach to its syndication of a $2.25 billion loan for Meditrust Corp., bankers close to the deal said.
To sway investors, Morgan has boosted the loan's pricing, slightly restructured its terms, and taken care to provide investors with detailed information about the loan, bankers said.
J.P. Morgan began syndicating the Meditrust deal last week after Salomon Smith Barney Inc. failed in its monthlong effort to do so.
Meditrust, a real estate investment trust based in Needham Heights, Mass., that specializes in health-care facilities, plans to use the loan to finance its purchase of a hotel chain and a golf course holding company. The diverse components of the planned acquisitions contributed to Salomon's difficulties in syndicating the loan, bankers said.
Salomon was fired by Meditrust after failing to attract investors to the deal. Morgan, which had been outbid by Salomon initially, was hired after the fiasco.
To avoid a similar fate, Morgan has addressed the chief criticism of the Salomon effort: poor pricing. Morgan is boosting yields by 0.375%, to the London interbank offered rate plus 1.75%, on the $1.5 billion, three-year revolver and $750 million, 18-month term loan.
Salomon had priced the three-year revolver with a starting price at Libor plus 1.375%, and the term loan at Libor plus 1.75% the first year and Libor plus 2% the final six months.
Morgan also has given Meditrust the option of reducing the term loan to one year. And the bank has given itself an extension in getting the financing completed. The loan is expected to be launched June 22. A bank meeting is scheduled for June 25. Bankers hope to close the deal by late July.
That will probably give Morgan some breathing room against a vote by LaQuinta Inns shareholders on June 17. A buyout by Meditrust would have to be approved by a two-thirds majority.
So far Morgan's cautious approach has apparently won over investors. Four banks have committed to marketing the loan as top-tier syndicators: Morgan, Bankers Trust Corp., Fleet Financial Group, and BankBoston Corp. Each will take a $563 million piece.
Morgan is also marketing its own expertise in an effort to calm investor fears. The bank ranks among the top lenders for REITs. A successful execution by Morgan would probably further the embarrassment suffered by Salomon.
However, bank sources say Salomon is, in part, blaming Meditrust for the failed syndication. Salomon alleges Meditrust officials did not encourage other banks with which they were doing business to commit to the loan, a standard industry practice.
Among those banks are members of the new syndicating group: Bankers Trust and Fleet, which is Meditrust's transfer agent. Fleet, however, did commit to the Salomon-led loan.
Laurie Gerber, Meditrust's chief financial officer, did not return phone calls seeking comment.
Separately, Meditrust on Thursday said it completed a $175 million preferred stock offering. It plans to use the proceeds to repay debt.
