Three NY Banks Succeed In Syndicating Yucaipa Loan

In what was viewed as an important test of the market for leveraged buyout loans, three banks successfully syndicated a $440 million credit for Yucaipa Cos., a California firm specializing in supermarket acquisitions.

The bank credit was underwritten by the banking units of Bankers Trust New York Corp., Citicorp, and Manufacturers Hanover Corp.

The funds will be used in part to help finance the $248 million purchase of American Stores Co.'s Alpha Beta grocery chain, which is being bought by a Yucaipa unit, Food 4 Less Supermarkets Inc. The remainder of the funds will be used to refinance existing Food 4 Less debt.

The successful syndication of the credit is especially significant because the Alpha Beta deal is classified as a highly leveraged transaction. Other recent deals have been structured with larger amounts of equity in an effort to avoid the HLT designation.

Bankers specializing in buyout financing said the Alpha Beta deal is proof that it is still possible to market HLTs, despite the stigma generally attached to such credits.

"It will certainly lift a cloud over the HLT market," said one banker who followed the deal but did not participate in the financing.

As of Tuesday morning, 13 banks had joined the syndicate, committing a total of $444 million, meaning that the credit was already oversubscribed. More commitments were expected by the end of the day, which was the official deadline.

In marketing the loans, the three underwriting banks cast a wide net for potential syndicate members.

An unusually large number of banks -- about 75 in all -- were invited to a meeting last month, at which the agent banks pitched the credit.

Among the U.S. banks that have committed to the Yucaipa credit are Chase Manhattan Bank and National Bank of Oregon. The syndicate also includes a number of foreign banks and several bank loan funds.

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