BankBoston Corp. and Deutsche Bank closed a $175 million loan last week for Iteq Inc., backing the company's acquisition of Astrotech International.

Structured by BankBoston as administrative and syndication agent, with Deutsche Bank acting as documentation agent, the new credit was well received and was oversubscribed at closing.

Houston-based Iteq is a service provider and manufacturer of equipment and systems for use in the processing, treatment, storage, and movement of gases and liquids. Astrotech is a designer, fabricator, and supplier of storage tank products and services.

"Industrial services is an industry we're very interested in," said Paul Hardiman, division executive for environmental services at BankBoston.

"We believe it's highly fragmented. We see that there's opportunity for consolidation, and we think Iteq is well positioned to take advantage of those opportunities," he added.

Iteq, which first became a client of BankBoston last year, cited reduced capital costs as a prime benefit of this loan.

"The new credit facility will reduce Iteq and Astrotech's combined interest costs by approximately 300 basis points, or more than $2 million annually, based on the present $75 million borrowing level," Larry McAfee, Iteq's chief financial officer, said in a statement.

"Equally important to the substantial reduction in cost of funds is the fact that $100 million of the commitment remains available to fund Iteq's continued internal growth plus future acquisitions," he added.

Pricing on the loan is tied to Iteq's leverage ratio of funded debt to earnings before interest, taxes, depreciation, and amortization, which is just over 2 on a pro forma basis. Pricing starts at 100 basis points over the London interbank offered rate, and would reach 175 basis points over Libor at a leverage ratio of over 3.5.

The nine other banks committed to the credit were Banque Paribas, Texas Commerce Bank, Banc One, Union Bank of California, Bank of Scotland, NationsBank Corp., Comerica Inc., Fuji Bank, and Hibernia Corp.

Last May, Iteq raised $32.8 billion in a common stock offering underwritten by Deutsche Morgan Grenfell, the securities arm of Deutsche Bank, with Everen Securities Inc. and Sanders Morris Mundy.

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