Following a heated bidding contest, BankAmerica Corp. has won the mandate to lead a $1.65 billion loan enabling Hanson PLC to create an independent company, U.S. Industries Inc.
Though observers viewed the noninvestment grade loan as "risky," syndicators said the most exceptional aspects of the deal centered on the competitive nature of the bidding - and who lost.
Chemical Banking Corp. had for several years been agent bank for Hanson Industries, the British conglomerate's Iselin, N.J-based U.S. subsidiary. U.S. Industries will be formed from companies now part of Hanson Industries.
Market sources disagree on whether BankAmerica outmaneuvered Chemical, or whether the cards were stacked against Chemical from the outset.
Sources say the structure of BankAmerica's deal looks appropriate for the level of leverage and risk, indicating that the San Francisco-based giant didn't lowball the transaction.
The loan is priced at the London interbank offered rate plus 162.5 basis points, with a 37.5 basis point fee for the unused portion of the loan, plus up-front fees. It is divided into two five-year parts: a $900 million term loan and a $750 million revolving credit.
The revolving credit for U.S. Industries, a 34-company conglomerate to be based in New Jersey, is expected to fill working capital needs for the companies that produce such names as Jacuzzi whirlpool baths, Farberware cookware, and Ertl toys.
Market sources suggest U.S. Industries may have favored a bank other than Chemical to differentiate itself from the parent company. Chemical declined to comment on the deal.
Despite the spinoff, Hanson will continue to operate several U.S. businesses, including a coal mining company, chemical companies, a material handling company, forest products, and a host of others.
To be sure, a few sources expressed concern about the transaction's leverage, and the corporate difficulties of running an assemblage of 34 companies.
However, several loan syndication sources expressed confidence in the bank's ability to put the deal together, and even suggested an interest in joining the facility.
A BankAmerica officer, Frank Brittan, said solicitations were evoking good responses from potential banking participants. A bank meeting is scheduled for March 15.
Market sources expect individual commitment levels to be less than $200 million. The ultimate syndication could include more than 60 banks.
If earlier deals for Hanson Industries are any indication of the bank loan future of U.S. Industries, the spinoff could be looking to banks for additional multibillion dollar facilities.
