Transtar Inc., formerly the transportation arm of USX Corp., is refinancing its bank debt on better terms under a new $470 million credit led by Chemical Bank.
Based in Monroeville, Pa., Transtar was formed in 1988 by Blackstone Capital Partners for the purpose of purchasing the USX transportation units in a $500 million leveraged buyout.
Chemical led the original buyout loan, as well as a refinancing two years later.
Proceeds from the new bank financing will be used mainly to repay a $185 million payment-in-kind note held by USX, and to refinance $255 million of remaining bank debt from the 1990 recapitalization.
Cash interest payments on the payment-in-kind note were to begin next year.
After the refinancing is completed, Transtar's total debt will stand at $445 million, down from $615 million immediately after the 1988 buyout.
The $445 million figure represents the term-loan portion of the new bank deal. A new $25 million revolver will not be drawn at the outset.
Transtar's borrowing rate will drop by 75 basis points, to 175 basis points over the London interbank offered rate.
The reduction reflects Transtar's improved balance sheet, ample cash-generating ability, and an overall decline in loan pricing, sources said.
Transtar's cash flow will exceed debt costs by over six times in the first year after the refinancing, sources said.
The company has no rated debt, but it is similar to a BB-minus credit, said one source.
Chemical began marketing the new bank deal last week. In addition to Chemical. Transtar's existing bank group includes Bank of Montreal, Banque Paribas, Continental Bank. Credit Lyonnais, and Nippon Bank.
Prospective coagents are being offered upfront fees of 75 basis points on commitments of $40 million. and participants committing $25 million would receive a fee of 50 basis points. said a source familiar with the deal.
Chemical would not comment, while officials at Transtar and Blackstone could not be reached.Deal at a Glance Borrower Transtar Inc.Amount $470 millionPurpose RefinancingLead Bank Chemical Bank