Fruit of the Loom Inc. is refinancing $800 million of bank debt on better terms, bankers said.

The Chicago-based underwear manufacturer is taking advantage of generally lower lending rates as well as its own improved operating performance and balance sheet.

Other borrowers are taking similar steps. Burlington Industries, for example, is refinancing a year-old bank loan with a $900 million credit priced 150 basis points below the existing deal.

Vote of Confidence

In a sign of the banks' increased confidence in Fruit of the Loom, the new three-year revolving credit is being granted on an unsecured basis.

Led by Bankers Trust Co. and four other co-agents, the credit replaces secured loans of the company's Union Underwear subsidiary.

The co-agents are Chemical Bank, NationsBank Corp., Bank of New York, and Bank of Nova Scotia.

35 Basis Points over labor

Based on Fruit of the Loom's current debt rating, the borrowing rate on its new credit would start out at 35 basis points over the London interbank offered rate, according to a banker familiar with the deal.

The pricing, already far below the rate on the existing Union Underwear loans, would fall further if Fruit of the Loom's debt is upgraded.

More Flexibility for Borrower

A bank meeting for potential syndicate members was set to be held Wednesday night in Charlotte, N.C., where Fruit of the Loom has a number of factories.

Bankers are scheduled to tour the plants today.

Providing the loan on an unsecured basis gives Fruit of the Loom more financial flexibility because it frees up assets that were previously pledged as collateral, noted Adele Archer, an analyst at Standard & Poor's Corp.

"In general, it's probably not an immediate benefit, but it could be later" if the company wanted to sell or releverage some of those assets, Ms. Archer added.

Upgrade Possible

Largely as a result of the new unsecured bank deal, Standard & Poor's Corp. is reviewing its rating on Fruit of the Loom's $250 million senior unsecured notes for a possible upgrade.

The notes, currently rated BBB by S&P, will now be of equal standing with the bank debt, because both are senior unsecured debt.

Fruit of the Loom had been stigmatized by the financial excesses of its chairman, William Farley, who last year was forced to relinquish control of textile concern West Point-Pepperell.

Debt Sharply Reduced

But through a combination of strong cash flow and proceeds from a stock offering, Fruit of the Loom has sharply pared its debt over the past few years.

The company's debt-to-capital ratio was about 53% on March 31, compared with nearly 75% at the end of 1990, Standard & Poor's noted.

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