Magazine article American Banker

Gee, Thanks! CS First Boston Pays Banks Shut out of Oversubscribed Deal

Magazine article American Banker

Gee, Thanks! CS First Boston Pays Banks Shut out of Oversubscribed Deal

Article excerpt

In what lenders are calling an unprecedented move, Credit Suisse First Boston recently paid fees to banks that did not receive allocations of a new loan.

Up-front and commitment fees are standard tools used by loan syndicators to entice lenders to join a deal and to compensate lenders if a credit remains largely undrawn.

But many market sources said they were confounded when Credit Suisse First Boston paid these fees to lenders that were shut out of a $200 million five-year revolving credit for Wolverine Tube, a Huntsville, Ala.- based manufacturer of copper and copper al loy.

Credit Suisse First Boston launched the leveraged loan on April 3. The firm, which acted as administrative agent and arranger of the deal, quickly received commitments from 16 lenders of $20 million each, a market source said.

Because the loan was so well received by the market, Credit Suisse First Boston and Wolverine Tube shut out the syndication period early, said market sources. The bank then allocated portions of the loan to only eight of the 16 lenders that committed to t he deal.

In an unusual turn, Credit Suisse First Boston and Wolverine Tube then decided to pay fees to the eight banks that were shut out of the syndication, said a market source. The fees amounted to about half of the 12.5 basis point fee that was set to be paid to the banks whose commitments were accepted.

In a further twist, Credit Suisse First Boston then lowered the deal's commitment fees from 12.5 basis points to 10 basis points, a market source said. …

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