Bloomberg News

Ocean Rig Raises Rate as Loans Poised for Worst Returns in Year

June 27, 2013

Ocean Rig UDW Inc. (OCRG), a provider of offshore deepwater-drilling services, increased the rate on $1.8 billion of loans as returns on the floating-rate debt are poised to record their worst month in more than a year.

A $900 million term loan B1 will now pay interest at 5 percentage points more than the London interbank offered rate, compared with an initial proposed margin of 4.5 percentage points, according to a person with knowledge of the transaction who asked not to be identified because terms aren’t set. The company also increased the rate on a $900 million 3-year term loan to 4.5 percentage points more than Libor from 3.75 percentage points more than the lending benchmark.

Ocean Rig joins more than 30 percent of borrowers that have boosted rates on their loans this month, according to Standard & Poor’s Capital IQ Leveraged Commentary & Data. After Federal Reserve Chairman Ben S. Bernanke outlined a timetable last week for a reduction in the central bank’s stimulus measures, leveraged loans in the U.S. are headed for their first loss since May 2012, having declined 0.59 percent in June, according to S&P’s/LSTA Leveraged Loan Total Return Index.

Prices of the largest leveraged loans fell 0.02 cent today to 97.20 cents, the least since Feb. 12, according to the S&P/LSTA U.S. Leveraged Loan 100 Index.

Deutsche Bank AG, Credit Suisse Group AG, Barclays Plc and Goldman Sachs Group Inc. are arranging the debt for Nicosia, Cyprus-based Ocean Rig, with both the loans being offered with a 1 percent minimum on Libor and a discount to par, according to the person.

A term loan B is sold mainly to non-bank lenders such as collateralized loan obligations, bank loan mutual funds and hedge funds. Libor is the rate at which banks say they can borrow from each other.

Boulder Brands

Boulder Brands Inc. (BDBD:US), a maker of natural and gluten-free food products, raised the rate on its proposed $245 million 7-year term loan by 50 basis points to 4 percentage points more than Libor, according to a person with knowledge of the offering who asked not to be identified because terms aren’t set. Citigroup Inc. is arranging the loan for the Paramus, New Jersey-based company and commitments are due by 5 p.m. today.

GreensLedge Capital Markets LLC and PNC Capital Markets LLC raised a $300.3 million collateralized loan obligation for MP Senior Credit Partners LP, according to a person with knowledge of the deal.

The fund, Gallatin CLO V 2013-1, includes a $177 million slice rated AAA that has a coupon of 115 basis points more than Libor. A basis point is 0.01 percentage point.

CLOs are a type of collateralized debt obligation that issue securities of varying risk and return and use the proceeds to buy pools of high-yield, high-risk loans.

To contact the reporter on this story: Sridhar Natarajan in New York at snatarajan15@bloomberg.net.

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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Companies Mentioned

  • BDBD
    (Boulder Brands Inc)
    • $12.73 USD
    • -0.02
    • -0.16%
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