Deals: Chemical Leads $1.15 Billion Syndication For 2 Divisions

Chemical Bank has won the mandate to lead $1.15 billion of financing for New Orleans-based Freeport McMoRan Inc.

Chemical and Chase Manhattan are equally underwriting the two part facility for separate divisions of the New Orleans-based natural resources conglomerate.

Separately, Chemical is leading a $650 million facility for Interstate Bakeries Corp of Kansas City, Mo. Most of the facility will support Interstate's announced purchase of the larger Continental Bakeries, makers of Wonderbread and Hostess products, from the Rallston Purina Company.

The two deals underscore escalating mergers and acquisitions activity, as well as the attractiveness of the syndicated loan market.

At the same point last year, these companies might have looked to the high yield bond market for financing, market sources note.

Freeport McMoRan Copper and Gold, a division of the Louisiana conglomerate, will use $750 million of its loan to become an independent, publicly traded company. The loan will provide working capital for the newly independent unit.

If Freeport shareholders approve of the spinoff, they will hold equity in two separate companies.

Freeport Resource Partners, a subsidiary of Freeport McMoRan, will use $400 million of the financing for working capital.

Chemical is expected to hold a bank meeting soon to syndicate the loans.

Chase is serving as the documentation agent for Freeport, while Chemical is acting as the administration and syndication agent.

Market sources said that the banks will seek some co-agents on syndication.

Sources close to the deal said that pricing was expected to be approximately Libor plus 1 basis point for the $750 million facility and Libor plus 1.25 basis points for the $400 million loan. The pricing is tied to the company's credit rating.

The Freeport facility is a five-year revolving credit. The success of the company restructuring, and thus the need for the loan, is contingent on both shareholder and regulatory approval.

Chemical held a bank meeting for the $650 million facility for Interstate Bakeries on Tuesday.

Most of the facility will support the purchase of St. Louis-based Continental. Interstate currently has $1.2 billion of annual revenue, Continental $1.9 billion.

Interstate will use a portion of the facility to refinance an earlier Chemical-led loan.

Sources close to the deal said that between 20 and 30 banks would probably join the syndication, most from the original bank group.

The loan is divided into a $425 million revolver and a $225 million term loan.

The loan is priced at Libor plus 75 basis points on a drawn basis. There is a 25-basis-point facility fee and a utilization fee of Libor plus 50 basis points.

Pricing on this loan is also tied to credit rating.

Sources close to the deal expect to close syndication in the middle of February.

The acquisition is subject to regulatory approval.