As syndicated lenders reach or near the limits of their annual lending budgets, a host of new credits are coming to market that bankers hope to finalize before yearend.
Lehman Brothers and Credit Suisse First Boston launched syndication of a new $620 million leveraged loan package for Exide Corp. with bank meetings last week in New York on Thursday and in London on Friday.
Meanwhile, National Bank of Canada and Bank of Nova Scotia are set to bring a $175 million loan to market this week for Rolland Inc., a Montreal- based paper and wood pulp company.
For Exide, an industrial and automotive battery company in Bloomfield Hills, Mich., Lehman is acting as co-arranger and syndication agent, with Credit Suisse First Boston as co-arranger and administrative agent. The company will use the loan to refinance Exide's outstanding debt.
Lehman was a lender in Exide's previous credit, but the new loan marks the first time Lehman has led a deal for Exide, according to a source familiar with the loan.
The credit is divided into three parts: a $220 million six-year multicurrency revolving credit; a $150 million six-year multicurrency term loan A; and a $250 million seven-and-a-quarter year U.S. dollar term loan B.
Up-front fees have not yet been set, the source said, but pricing for the loan is tied to the company's leverage ratio. Initial pricing for the revolver and term loan A is set at 250 basis points over the London interbank offered rate. Pricing for the term loan B begins at Libor plus 225 basis points.
Rolland plans to use its loan to fund both recently completed and pending acquisitions, construction of new facilities, and to refinance existing long-term debt, said Guy Duplessis, the company's treasurer.
Both National Bank of Canada and Bank of Nova Scotia are historical lenders to Rolland and are among the five banks in its current loan.
Companies in the pulp and paper industry typically have highly cyclical cash flows and are vulnerable to ups and downs in commoditized paper markets. But changes Rolland has made to its operations have brought a host of eager lenders to the company, said Mr. Duplessis.
"This time it's been quite easy. It did not take a long time to negotiate the financing. The bankers were very interested," he said.
Rolland has diversified its operations, moving into pulp processing and product distribution, he added.
"We have reoriented our business to value-added products instead of commodities so we are much less vulnerable to the cycle now," said Mr. Duplessis. Focusing on higher-margin products such as watermarked paper, letterhead stationery, parchment, security papers, and banknotes has helped to stabilize cash flow.
The loan package includes an operating line of credit of $75 million and a six-year term loan of $100 million. Pricing is tied to the company's leverage ratio and begins at 100 basis points over Libor. The loan is expected to close by Dec. 15, said Mr. Duplessis.
Meanwhile, Bally Total Fitness Corp. announced the closing last week of a new $70 million loan from Chase Manhattan Corp. that more than doubled the company's borrowing power.
Six banks committed to the three-year revolving credit, arranged and agented by Chase. The deal replaces a $30 million Chase loan. Chicago-based Bally operates fitness centers nationwide.
The new loan follows a $90 million equity issue in August and $225 million high-yield bond issue in October, both lead managed by Merrill Lynch & Co. The issues reduced the yield on Bally's debt to 9.875% from 13%.
"As we've been growing our equity capitalization and refinancing our public debt, we felt the final piece was to increase our bank facility," said John Dwyer, senior vice president, chief financial officer and treasurer of Bally.
Bally doesn't expect to draw down the loan in the near term, because its cash flow now provides enough funding for the company's expansion and growth needs, he said. "It's displaying financial strength versus actual cash needs," said Mr. Dwyer.
