In what could be one of the biggest loan syndications this year, the U.S. arm of Britain's Hanson PLC is expected to refinance as much as $6.5 billion of debt in the bank loan market, sources said.
Included in that amount is $2.5 billion of nonbank debt that will be assumed by Hanson as part of its planned acquisition of New York-based Quantum Chemical Corp., a loss-plagued maker of plastics.
Chemical Led Credit
The U.S. unit, known as Hanson Industries, also has some $4 billion of existing debt under a 1991 credit agreement with a group of banks led by Chemical Bank and five co-agents -- ABN Amro Bank, Citibank, Hongkong and Shanghai Bank, Swiss Bank, and Toronto-Dominion Bank.
National Westminster Bank is the lead bank for a separate 1991 credit for the parent company in London.
While Hanson has not spelled out its plans yet, banking sources said it is likely that much of the combined debt will be refinanced under a new credit agreement. That has been Hanson's practice in past acquisitions, sources noted.
Some funds for debt repayment could also come from the parent company in London, sources suggested.
Robert Brier, treasurer of Hanson Industries, did not return phone calls for comment.
Hanson's parent company in London last week agreed to buy Quantum in a stock swap valued at $720 million.
The deal is the latest in a string of acquisitions Hanson has made in the United States and the United Kingdom.
In recent years, Hanson has purchased Consolidated Goldfields, Peabody Coal Co., and Beazer PLC.
Quantum's debt consists of first-mortgage obligations and public and privately placed junk bonds, with coupons running as high as 13% on a series of senior subordinated debentures. The blended rate on the debt is over 10%.
Hanson's U.S. arm pays less than half that rate in the bank loan market, so Hanson stands to reap substantial cost savings by refinancing the Quantum debt. Last week, Hanson reportedly said it could pare Quantum's debt costs by at least $125 million.
Under the 1991 credit agreement, Hanson pays 75 basis points over the London bank offered rate. At current Libor rates, that works out to around 4%.
Though Hanson PLC has almost as much cash as debt on its balance sheet, the U.S. unit is highly leveraged. For that reason, the terms of the 1991 credit were viewed as being highly favorable to Hanson.
Banking sources declined to speculate about the pricing of any new deal.