Continental Bank has replaced Bankers Trust Co. as agent bank for Larizza Industries Inc., a karker of molded plastic audio parts in Troy, Mich.
In a statement Monday, the company said it signed a $50 million credit agreement with Continental.
Larizza flirted with bankruptcy in late 1989, when it defaulted on a $100 million bank loan from Bankers Trust, used to refinance acquisition and other debt.
Since then, the company has completd a successful restructuring, which translated into profitable results in 1992 and 1993 following a string of losses.
Last year, the company reported net income of $12.4 million on sales of $148 million.
Given Larizza's improved financial condition, "we though we could have more favorable terms," said controller Mary Jane Vicary in explaining the company's decision earlier this year to seek bids on a new credi[ agreement.
Continental, which has a strong middle-market franchise in the Midwest, came back with the best bid, she added.
The new loan mainly replaces what's left of the Bankers Trust deal, which was redone in 1991.
Nearly half of the $100 million loan was recently exchanged for Larizzas common stock, under a conversion option granted to Bankers Trust in 1991, when the deal was recast.
Bankers Trust subsequently sold the debt to others -- including ING Bank - who exercised their options in March to convert the debt into a 3.7% common equity stake in Larizza.
Larizza had been paying 1.5 percentage points above the prime rate on the remaining $36 million of the old Bankers Trust loan.
Under the new credit agreement with Continental, the company has the option of paying either 2.25 percentage points above the London interbank offered rate, or half a percentage point above the prime rate.
Pricing is tied to the company's financial ratios. The interest rate could go as low as prime, saving the company $500,000 a year in interest costs compared to what it had been paying, Ms. Vicary said.
That pricing, however, only applies to $35 million of the new credit. The remaining $15 million, earmarked the Larizza's Canadian subsidiary, carries a higher interest rate.
The new credit agreement contains less-restrictive covenants, providing the company greater flexibility for making capital expenditures.
Ms. Vicary said Larizza is working with Continental on syndicating the loan, which was fully underwritten by the agent bank.