The $2.2 billion term loan backing Kinetic Concepts' buyout was probably not the best test case for using shorter dated loans to appeal to maturing close, a banker involved with the transaction said today.

Robert Schleusner, managing director and co-head of leveraged finance at Bank of America Merrill Lynch, told participants at the loan syndication and trading association's annual conference that BofA Merrill had "some success" in carving out a $325 million five-year tranche, "but I'm sure there were some guys (CLO managers) who could've done it if they liked the credit."

Kinetic is rated 'BB+' by Standard & Poor’s and 'Ba2' by Moody’s Investor Service.

CLOs are still the biggest loan investors, holding roughly half of the $500 billion in outstanding paper, yet most CLOs were issued in 2005 and 2006 and are nearing the end of their reinvestment periods, making it difficult for them to but seven-year loans.

Schleusner, who participated in a panel on the current state of the leveraged loan market, said the typical order BofA Merrill received was for $75 million total, $65 longer-dated and $10 million shorter dated.

Bankers also carved out a euro-denominated tranche, but Schleusner did not comment on whether this might be an important feature of future deals.

The banker did say, however, that offering "real call protection" is "one of the biggest missing pieces of the loan market." Kinetic's loans were non-callable for one year, and he said this was a help, particularly in marketing the paper to high yield bond investors.

One thing Bank of America did not do was carve out a term loan a tranche for the pro rata market. "Banks will not stretch" into lower credits, "so that would not have helped," Schleusner said.

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