Chemical Bank is leading a $2.9 billion credit for Tenneco Inc.'s Case Corp. subsidiary, which is being partially divested through an initial public offering of stock.
Tenneco announced the planned offering Tuesday, confirming published reports that it was seeking to shed part of Case, a leading maker of farm and construction machinery.
The Case bank deal comes on the heels of a $775 million bank financing for Collins and Aikman Holdings, which is also being arranged in conjunction with an IPO.
Chemical is leading the C&A deal, too, and both credits likely will be syndicated in the loan market at about the same time.
Surprising Choice
Tenneco's selection of Chemical as agent bank for Case was somewhat surprising, because J.P. Morgan & Co. led Tenneco's most recent major bank deal -- a $1.4 billion revolving credit line in late 1992.
"We have a lot of banks that we're very close to," said Karen Osar, Tenneco's treasurer.
"Chemical was chosen primarily because they are the leader in syndicated loans," she added. There was no bidding process.
Chemical committed to provide $750 million of the total amount. Tenneco's other relationship banks, including Morgan, will be invited to participate.
Morgan's securities unit was picked as a co-manager of the IPO, signaling that Morgan's relationship with Tenneco remains strong.
In a regulatory filing, Tenneco said it planned to offer 35% of Case in a stock offering led by CS First Boston and Lazard Freres & Co., and co-managed by Morgan Stanley & Co., J.P. Morgan Securities, and Smith Barney Shearson.
Tenneco didn't reveal how much it expects to raise in the offering.
The Case bank credit will consist of a $1 billion term loan and an $800 million revolver, as well as a separate $1.1 billion revolver for a newly formed Case finance subsidiary, all maturing in five years.
About half of the entire $2.9 billion credit will be drawn immediately by Case. That should be a strong selling point for the deal in the loan market, because banks are hungry to book funded assets.
The interest rate on the loans ranges from 75 to 125 basis points over the London interbank offered rate, depending on Case's credit rating, or a mutually agreed upon financial test.
Tenneco's senior debt is rated BBB-minus by Standard & Poor's Corp., but Case does not yet have a rating of its own.
Case is approaching the IPO market at an opportune time, particularly because of the improvement in the farm economy.
"Anything farm-related is apt to be received well on Wall Street," said Robert Natale, a analyst who covers new stock issues for S&P.
