Several credit tenant lease (CTL) structures re-entered the market recently, braving the difficult pricing scenario that drove the issuers to retire their deals last year.

Despite hefty reservations and a lack of appetite for the retail sector, Borders Inc. was back in the private placement market toting what was previously a $60 million deal in a trimmed $54 million capsule. McDonald Investments Inc. led the deal.

The group managed to secure good interest from real estate investors willing to look past the sector and view the bookstore's story credit, described one source familiar with the situation.

"We think retailing is a difficult environment, however if you are doing business with the top tier, and Borders is clearly that, you can find a lot of people attracted to it," said McDonald's spokesman.

Last November the company faced strong concern over both the retail sector and also the future of bookstores, as many questioned whether the company would survive a battle against giants like Amazon.com.

Original price talk was in the 100 basis points over Treasurys range for the NAIC-1 issuer.

Despite initial statements from a McDonald's spokesman that the deal encountered interest at the original price talk, it faced tremendous pressure to widen the deal, said a source who originally looked at the books.

To be sure, in its resurrection the sentiment has been reciprocated with pricing reported at 450 basis points over Treasurys range, confirmed a source following the deal.

"It's not surprising, given the credit and the industry," said one buyside source.

However, the McDonald's spokesperson said the deal went extremely well considering the difficult environment.

Ahold again

Rearing yet another revived issue, the market hosted the Royal Ahold CTL issued in the 144 A market. Although traditional private CTL investors were not interested in participating in the deal, the issue was still expected to set precedent for the momentum the market can expect going forward.

Sources following the deal said the company was originally expected to price the full $550 million issue late in 2000. The deal, pulled from the market last November, faced concerns over irregular cashflow structures indicated in the swelling price talk that reached the 300 basis points over Treasurys range.

Market sources confirmed the deal priced last week and was set to close in the following week.

"It is good news that the Ahold CTL finally got done," said one sellside source. "It only helps the overall perception of CTLs generally when a sizeable transaction is priced."

CTL pipeline

McDonald promises a strong upcoming CTL pipeline fueled by a market environment sensitive to asset allocation. "We are in the environment where people are looking to efficiently use their assets and an inefficient use of assets is tying it up in real estate," said the company spokesman. "Anytime you enter into an environment like this you will have people reflecting on the capital they have to play."

In the wings is also Legg Mason, which also expects to launch several transactions in the next week. A spokesman for the company said it has received many inquiries about potential transactions.

Nevertheless buyside players with a growing appetite for the structure said though the deals are trickling in they are still awaiting the caliber the market enjoyed in 2000 - it is still the question of financials that is keeping issuers at bay.

"There are a handful of [CTLs] that are getting dangled in front of us but to get it done you have to have the financial, the NAIC requires it," said one buyside source. "In a couple of instances you start doing the work, you start to get involved and all of a sudden [the agent] really can't get you the financials. When that happens, it's Thank you very much, see you later.'"

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.