Burlington Coat Factory Financing Deal Pulled - What are the Implications?

The froth of the high yield market and the volume of leveraged recaps by equity sponsors have been widely reported. Many in our industry have opined that the high level of deal flow is hiding the problems of troubled companies as they are able to ink deals for new financing at better pricing or on covenant-lite terms that rival what we saw before the credit market contraction of 2008. We are used to seeing reports like Debtwire’s calculation that $26 billion in new issue bonds were marketed in the month of October alone. We restructuring practitioners bemoan that these deals are shifting the debt “maturity wall” out even further to 2013 or beyond.

So, it was interesting to note yesterday’s report that Burlington Coat Factory’s $1.5 billion refinancing/dividend recap was pulled after investors pushed back on pricing offered based upon the ratings assigned to the deal (read the Bloomberg article). One deal certainly does not make a trend and maybe the market simply wants to see how retailers perform this Christmas season. In any case, we should bookmark this one and see where things go from here.

Your thoughts?