Chase, Citicorp Eyeing A $900M Credit Facility For Service Merchandise

Chase Manhattan Corp. and Citicorp are expected soon to launch a five- year, $900 million credit facility for Service Merchandise Co.

The new facility would replace the Nashville-based retailer's bank credit lines, which would have expired in two years.

Thomas Garret, vice president and treasurer of Service Merchandise, said such a move would make sense now because of "the terms, the tenor that we could attract at this time, and the positive environment with respect to bank liquidity that exists today."

The loan, secured by company assets, would be structured as a $650 million revolving credit and a $250 million term loan. The pricing of the revolver is tied to the financial performance of Service Merchandise, starting at 200 basis points over the London interbank offered rate. The pricing for the term loan is 225 basis points over Libor.

Both Chase and Citibank have committed to provide $450 million each of the fully underwritten $900 million in financing and expect to arrange a syndicate of lenders. A bank meeting is slated for early August.

Chase is the administrative and collateral agent for the financing. Citicorp is the documentation agent.

Sources at Citibank say that early investor interest has been strong and that the bank is optimistic about the deal, which is expected to close in early September.

The closing of the financing is conditioned on the tender and consent solicitation of Service Merchandise's $100 million, 8.37% senior notes due in 2001. Those efforts were launched July 21. Merrill Lynch & Co. is the dealer manager for the offering.

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