Chemical Bank was picked by Playtex FP Group Inc. to lead $575 million of new bank loans as part of a recapitalization of the Stamford, Conn.-based maker of personal-care products.
The loans will be made to the company's Family Products subsidiary.
Playtex FP Group, which makes tampons and baby-care and hair-care products, is not related to Playtex Apparel Inc., a maker of bras and girdles.
In winning the deal, Chemical beat out Bankers Trust Co., the existing lead bank for Playtex.
Both Banks Bid
Glen Forbes, Playtex's vice president for finance, said both banks bid to lead the new credit but Chemical's proposal was more competitive. He declined to elaborate.
The new credit agreement was disclosed by Playtex in a regulatory filing last week, in which the private company said it planned to raise about $243 million in an initial public offering of stock and another $360 million through the sale of senior subordinated notes.
As a condition for getting the new bank loans, Playtex must raise at least $200 million in the stock offering.
Proceeds of the offerings and the credit agreement will be used to repay or redeem higher-cost debt and preferred stock.
On a pro forma basis, the recapitalization would have reduced the company's pretax interest costs by about $47 million in 1992, and by $38 million in the first nine months of this year. Playtex said in the filing.
The company has various series of outstanding notes and preferred stock, including 11 1/2% senior notes, 13 1/2% senior subordinated notes, and 15% subordinated notes.
As of Sept. 25, Playtex also owed about $145 million under its existing Bankers Trust-led credit agreement.
Rate on Existing Credit
The old credit originally consisted of a $375 million term loan and a $110 million revolver. As of Sept. 25, Playtex was paying an average interest rate of about 5.95%, or roughly 276 basis points over the three-month London interbank offered rate.
Pricing of the new credit, which consists of a $500 million term loan and a $75 million working-capital line, wasn't immediately available.
Several banking sources speculated, though, that Playtex probably was able to obtain more favorable pricing under the new credit agreement.
Interest Coverage
In the first year of the credit pact, Playtex's cash flow after capital expenditures must exceed cash interest costs by at least 1.7 times. The minimum interest coverage rises each year, to 3.8 times in 2002, the final year of the credit agreement.
Covenants concerning the ratio of funded debt to cash flow were considered by several sources to be aggressive.
The $500 million term loan portion of the new credit is split into three tranches, each with its own pricing.
Amortization Schedule
A $300 million "A" tranche starts to amortize in the first year, when $30 million of the principal amount is due. Annual payments rise to $50 million in the fifth, sixth, and seventh years.
The amortization schedules of a 7 1/2-year, $105 million "B" tranche and an eight-year, $95 million "C" tranche are both back-ended, meaning most of the payments fall due in the final years.
Indeed, most of the principal payments on these two tranches come due after the "A" tranche has been paid off.
The two longer-maturing tranches probably were designed for loan funds and other non-bank investors. Deal at a Glance Borrower Playtex Amount $575 million Lead bank Chemical Bank Purpose Refinancing
